## What is a Loan?

A loan is once you receive cash from a friend, bank or establishment in exchange for future compensation of the principal and interest.

The principal is the value or amount you borrowed, and also the interest is that the value or amount charged for receiving the loan. Since lenders are taking a risk that you simply might not repay the loan, they need to offset that risk by charging a fee, called interest.

**Loans usually are secured or unsecured.** A secured loan involves pledging a possession (like an automobile, boat or house) as collateral for the loan.

If the possession defaults, or does not pay back the loan, the investor takes possession of the quality. An unsecured loan possibility is not as common.

If the receiver does not pay back the unsecured loan, the investor does not have the right to get something to ask for.

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## Different types of Loans

A loan can be of many types, depending upon its nature. **These types are:**

- Debt Consolidation Loans
- Student Loans
- Mortgages
- Auto Loans
- Personal Loans
- Loans for Veterans
- Loans for Veterans
- Payday Loans

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## What is Interest?

Interest is calculated as a percentage of a loan balance, paid to the loaner for using their cash. The value and amount are typically quoted as an annual rate; however, interest may be calculated for periods that are longer or shorter than one year.

**When Borrowing:**To borrow cash, you’ll have to repay what you borrow. Additionally, to compensate the loaner for the danger of disposal to you (and their inability to use the money anywhere else), you would like to have money from the amount they borrowed.

**When Lending:** If you have got more money available, you'll lend it out yourself or deposit the funds during a bank account. In exchange, you’ll expect to earn interest. If you're not aiming to earn something, you may be tempted to pay the money instead, as a result there’s very little profit to waiting (other than saving for future expenses).

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## Interest depends on

The paying or earning value of interest depends upon:

- The charge per unit
- The amount of the loan
- How long it takes to repay

A higher rate or a longer-term loan ends up in the borrower paying more interest.

Margin calculator helps you to monitor the gross profit and net profit along with interest value.

## Simple Interest Loan Calculator

The simple interest loan calculator calculates an increased amount accrued principal and interest. For interest only, use the simple interest calculator.

**Simple Interest Calculator Equation (Principal + Interest)**

$$A\;=\;P(1 + rt)$$

**Where,**

**A** = Total accrued value (principal + interest)

**P** = Principal value

**I** = Interest value

**r** = Rate of Interest in decimal per year; $$r = \frac{R}{100}$$

**R** = Rate of Interest in percentage per year; $$R = r * 100$$

**t** = time period based on in months or years

**From the above formula,** $$A\;=\;P(1 + rt)$$ derived from $$A\;=\;P + I$$ and $$I\;=\;Prt$$ **therefore** $$A\;=\;P+I$$

$$A=\;P+Prt$$

$$A=\;P(1 + rt)$$

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## Compound Interest

Compound interest is **interest calculated** on the initial principal, which consists of all of the previous periods **accumulated interest** of a deposit or loan.

Interest can build a total grow at a rapid rate which is calculated only on the principal value or amount.

The online compound annual growth rate calculator can help you calculating cagr and compound interest online.

## Key Points

- Compound interest is calculated by multiplying the initial principal value by one plus the annual rate raised to the amount of compound periods minus one.
- Interest is combined on any given frequency schedule, from continuous to daily to annually.
- When calculating compound interest, the amount of compounding periods makes a major distinction.

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## Compound Interest Calculator

Compound interest calculator for calculating compound interest is:

**Compound Interest = Total amount of Principal and Interest (payable value for future) less Principal amount at present (or Present Value)**

$$[P (1 + I) n] – P$$

$$P [(1 + I) n – 1]$$

**Where,**

**P**= Principal**I**= Nominal annual interest rate**n**= Number of compounding periods

## Simple Interest Calculator

Calculatored introduce Simple Interest Calculator to use for calculation of simple interest rate and payment per month.

Where,

You have to enter four requirements.

After you entered the requirements then press “calculate” button and Simple Interest Calculator will calculate the simple interest rate and payment per month.

**Here is an example using Simple Interest Calculator to find the simple interest rate and payment per month.**

- Amount of loan
- Amount of interest on loan
- Time (how much time to pay loan)
- Select the month or year

After you entered the requirements then press “calculate” button and Simple Interest Calculator will calculate the simple interest rate and payment per month.

Here is an example using Simple Interest Calculator to find the simple interest rate and payment per month.

- After entered Amount of loan= 100000
- Amount of interest =7
- Time = 7 months

Then, press **“calculate”** button and the simple interest rate and payment per month is calculated on the right side of the calculator in the status block.

**Related:** Learn about return on investment and return on assets and their importance for a company.