Installment Plan Interest Calculator

How to calculate installment interest?

This calculator uses the add-on interest method, where interest is calculated on the original principal for the entire term.

Formula: Total Interest = Principal × (Rate / 100) × (Months / 12)

Using the calculator: an example

If you finance a $1,200 purchase at a 10% annual rate for 12 months:

Step-by-step calculation:

• Calculate annual interest: $1,200 × 0.10 = $120
• Since the term is 12 months (1 year), total interest is $120
• Add interest to principal: $1,200 + $120 = $1,320 total
• Divide by 12 months: $110 per month

Frequently Asked Questions

What is add-on interest?

Add-on interest is a simple method where the interest is computed on the full original loan amount, regardless of payments made.

Is this the same as an APR?

Not exactly. While it uses an annual percentage, standard amortized loans (like mortgages) usually result in lower total interest than add-on loans with the same stated rate.