Calculation Formulas for Different Types of Loan Interest – When you apply for a loan from a bank, you will definitely consider several things in advance such as the type of interest offered, the amount of interest, and the amount of installments you will pay later. But did you ever find out how to calculate the interest on the loan that you submitted?

How to calculate loan interest is indeed not widely known by the public. When in fact knowing how to calculate loan interest is no less important if you are going to apply for a loan to a bank. Each type of loan has a difference in how the interest is calculated. Even though the interest rates are the same, a different calculation will affect the amount of installments that you must pay each month.

In general there are three types of loan interest calculations for all loan products, namely flat interest calculation, effective interest calculation and annuity interest calculation.

## Formula for Calculating Different Types of Loan Interest

### 1. Flat Interest Calculation

Flat interest rates are the easiest loan interest calculation. By using a flat interest calculation, you will pay the same principal and interest in installments every month. This calculation is usually used to calculate the interest on unsecured loans or unsecured loans. Flat interest rates are referred to as fixed rates where the loan ceiling and the amount of interest will be calculated in balance according to the term of the loan.

The interest value will remain the same every month because it is calculated based on the percentage of interest multiplied by the principal plus the interest every month.

#### The calculation formula:

Monthly Interest = (P xlxt) / jb

#### Skills:

P = principal loan

l = interest rate

t = amount of credit period

jb = number of months in the credit period

### 2. Effective Interest Calculation

Calculation of the effective interest rate, also known as sliding rate, is the calculation of loan interest at the end of each installment period. Loan interest is calculated from the final balance each month. Interest is calculated based on the principal amount that has not been paid by the borrower. That way the amount of interest per month will vary according to the principal amount that has not been paid.

The interest value paid by the borrower will decrease every month so that the repayments will decrease from time to time. The second month installments will be smaller than the first month installments, the third month installments are smaller than the second month installments, and so on.

#### Calculation formula:

Interest = SP xix (30/360)

#### Information:

SP = principal balance of the previous month’s loan

i = annual interest rate

30 = number of days in a month

360 = number of days in a year

### 3. Calculation of Annuity Interest Rates

An annuity rate calculation is a modification of the effective loan interest calculation. It aims to make it easier for customers to pay installments every month. This loan interest calculation determines the amount of installments each month with the same amount, but the composition of the interest and principal installments will change every period.

The monthly interest value will decrease but the principal installments will increase. This interest calculation makes the portion at the beginning of the loan becomes very large but will gradually decrease in the end of the loan.

#### Calculation formula:

Interest = SP xix (30/360)

#### Information:

SP = principal balance of the previous month’s loan

i = annual interest rate

30 = number of days in a month

360 = number of days in a year

Note: The formula for calculating an annuity interest is the same as the formula for calculating the effective interest

### 4. How to Calculate Loan Interest on CoinTerms

For those of you who apply for a loan at CoinTerms, the monthly interest rate that you must pay will be informed before you approve it, starting from 0.75% to 1.67% per month. However, if you are not a borrower at CoinTerms and are curious about the loan interest, here’s how to calculate loan interest on CoinTerms.

That is the formula for calculating loan interest that is commonly used in every bank loan product. By knowing the loan interest calculation formula, you can find out the loan repayment installments that you must pay each month.

That way you can prepare your finances in advance, so that during the loan installment period you can pay it off on time and in accordance with the provisions provided by the Bank.