That sweet smell of startup success, when the first revenue trickles—it’s incomparable to any other feeling, but sometimes it doesn’t last long. You soon face a financial beast you thought only traditional, boring businesses dealt with—loans. Your cash runway calculation isn’t stretching as you hoped, and suddenly, you’re googling “how to calculate interest on a loan” like your life depends on it.
Considering that over 75% of surveyed small businesses are concerned about their access to credit, when was the last time you calculated interest, credit score or debt-to-income ratio to see if you could find affordable financing? Interest math may not have even been on your business radar. Now, you’re stuck deciphering APRs, APYs and spreadsheets that look more complicated than your product roadmap.
Don’t worry; that’s what we’re here for.
In this short yet actionable guide, we’ll explain exactly how to calculate interest on a loan (using a loan calculator). We’ll show you the math and the mistakes to avoid.
So, grab your sixth espresso shot for the day and let’s demystify loaning.
Spoiler alert: it’s not rocket science (and it's not like a car loan or a personal loan); how much interest you pay depends on the monthly interest rate and how the interest is calculated.
There are two common ways to calculate interest on a loan: simple and amortizing interest.
Whether you're considering borrowing money for expansion or bridging cash flow gaps, you need to know what kind of interest you’re dealing with. Let's break these two terms down.
Simple interest is somewhat similar to compound interest. It’s calculated on the principal amount (the original loan sum). It’s straightforward and predictable because it remains constant with each monthly payment until the loan amount is paid off (fixed monthly payment).
It’s popular for short-term loans or smaller sums.
Here's how to calculate simple interest:
For example, if you borrow $100,000 at a 5% annual interest rate for three years, that would be:
Interest = 100,000 x 0.05 x 3 = 15,000
According to this simple interest calculation, you’ll owe $15,000 in interest over three years, bringing the total interest payment to $115,000.
Amortizing interest is more complex. Here, interest is recalculated on the remaining principal balance after each monthly payment.
When you start repaying the loan amount, most of the payment goes toward interest, and a smaller portion is applied to the principal. Your monthly payments include both principal and loan interest, which means the interest portion decreases as the loan principal is paid down (due to the amortization schedule).
Need an example?
Let’s say you borrow $100,000 at a 5% annual interest rate for five years. The lender calculates monthly payments so that you gradually pay off both interest and principal. For example, your first payment may include $400 in interest and $1,200 toward the principal. By the final payment, almost all $1,600 will go toward the principal.
Shortly put:
💡Bonus knowledge: Accumulated interest, or accrued interest, is the amount of past interest that is due but not paid.
The math behind interest calculations can feel daunting, especially with amortizing loans.
Instead of wrestling with spreadsheets (that can miscalculate higher monthly payments), you can try our Fuelfinance Loan Calculator, a loan interest calculator.
This tool simplifies the process, letting you plug in your loan terms and instantly see your loan amount, total cost, monthly payment amount (calculate monthly interest) and how much goes toward principal and interest.
We imagine you see loans as the villain of your entrepreneurial story, but that’s not always the case.
Sometimes, they’re the secret weapon you need to level up. The trick is knowing when a loan makes sense and when it doesn’t.
Ask yourself these three questions to decide if the loan is the right choice for you:
To answer the first question, you need to know how much cash is coming in and going out.
If the total loan repayment can turn your cash flow into a dumpster fire, it’s probably not the right time. If you can handle the monthly payment even on a bad day, borrowing money makes sense.
Shortcut: Our Loan Calculator shows how the monthly loan payments fit into your budget.
Don’t be afraid to imagine the worst.
Your growth strategy flops.
The product (re)launch delays.
The market implodes (yet again).
Can your company survive with that loan payment and repayment term hanging over your head? If the answer is a “no”, then maybe don’t gamble your startup's future just yet.
Our Calculator can even help you model worst-case scenarios so you can stop guessing and start planning. Just enter the numbers, get instant insights and make the smartest decision for your company.
If you’re borrowing money, you should make more money in return. We hope that’s clear.
So, before settling for a loan, ask yourself the following questions:
If the answer to all these questions is “yes”, then a loan might be your next power move. If not, feel free to pass on the opportunity.
The Fuelfinance Calculator can help you crunch the numbers, comparing potential returns against the loan’s interest costs, so you can confidently decide whether to take the loan.
If you made it down here, you’re probably considering taking out a loan but want to avoid getting blindsided by surprise payments or interest that feels like a bad joke.
Fuelfinance is there to help.
Think of Fuelfinance as your company’s outsourced CFO and BFF, offering financial advice and tools to help you make smarter, data-backed decisions without complicated spreadsheets.
Here’s how to use the Fuelfinance calculator made by experts to calculate total interest like a pro.
To get started, download the Loan Calculator.
No complicated downloads or 20-minute tutorials, just straightforward access to the numbers you need.
We know that not all loans are created equal. Select the type of loan you’re dealing with—simple interest or amortizing.
Choosing the right type ensures the calculator gives you realistic numbers instead of setting you up for a disaster down the road.
This is when the magic happens.
You’ll need to type in:
Here’s the fun part. You can tweak the numbers to see how different options impact your plan:
Fuelfinance makes it easy to experiment until you land on a payment plan that actually works for you and your company.
Our calculator also allows you to estimate annuity-based loans and traditional loans.
In an annuity-based loan, you make equal periodic payments (monthly, quarterly, etc.) throughout the loan term. These payments cover both interest and principal, with the interest portion decreasing over time as the loan balance is paid down and the principal portion increasing.
In traditional loans, you pay a fixed amount toward the principal with each installment, while the interest is calculated separately based on the remaining loan balance. As a result, the total payment amount decreases over time.
This isn’t just another boring calculator. It’s a plug-and-play tool designed for founders like yourself who don’t have time for financial guesswork.
You can:
The tool will:
Go ahead, complete the form to download the calculator and show those spreadsheets who the boss is.
Running a business shouldn’t feel like you’re constantly in the “This is fine” meme. At least not when it comes to financial aspects.
That’s why we created Fuelfinance.
With our all-in-one platform, you can manage your numbers with ease, without spending hours on spreadsheets or feeling fatigued from all the financial jargon. That being said, there’s no need to stop using spreadsheets if you're comfortable with tools like Google Sheets or Excel. You can use Fuelfinance on its own or to enhance your current processes with more in-depth financial analysis and automated updates. With Fuelfinance, you get financial statements and forecasting at your fingertips:
There's more.
With Fuelfinance, you also get access to:
With our tool, you'll feel confident making strategic business decisions. You won't have to wonder if your next move is a genius idea or a costly mistake—you'll know.
If you are concerned about your financial data being compromised, there's nothing to worry about. Fuelfinance uses proprietary software to save your data in its secure cloud, ensuring everything works fast and that no data is damaged while giving you access to it from anywhere, anytime.
In addition, we also offer a Bootstrap plan for startups in the pre-seed stage. It's designed for early-stage companies and includes essential features like a real-time financial dashboard, templates to build a budget quickly, and KPI recommendations (like key SaaS KPIs). As your company grows, Fuelfinance scales with you, adding advanced tools and detailed financial insights when you need them.
🎉But enough from us. We like to get our customers to do the talking, too.
Here are some of their recent wins:
Navigating startup finances is anything but peaceful. Luckily for you, Fuelfinance allows you to take control of your finances like a pro (including payment schedules, annual percentage rate, total loan cost, down payment and outstanding balance)—no complicated math or spreadsheets required.
Fuelfinance is there to motivate and empower you to make smarter, data-backed decisions. You can say “goodbye” to financial headaches and “hello” to the peace of mind you deserve.
Book a 30-minute call today to see how Fuelfinance can support your growth.
For a simple interest loan, 6% interest on $30,000 would amount to $1,800 annually.
The formula to calculate the interest rate of a loan is: Interest Rate (%) = (Total Interest Paid / (Principal Amount x Loan Term)) x 100.
Divide the total repayment amount by the factor that includes interest rate and loan term, or solve based on the principal formula for simple or amortizing loans.
A simple interest loan calculator is a tool designed to calculate the total interest and repayment amount for loans with interest applied only to the principal amount. You can use it for anything from secured loans backed by assets, like home equity loans, to auto loans, as well as regular unsecured loans.
