Calculating Interest Interest can grow in a couple different ways, and its important to know how much you will be paying back when you borrow money for a car, house, or education.

Simple Interest Simple interest means the loan will only charge interest on the principle of the loan, or the originally amount borrowed. Simple interest usually results in a smaller over all interest fee. Some examples of simple interest in real life include most car loans, store credit purchases, and Certificates of Deposit. To calculate simple interest you multiple the principle, by the interest rate (4%= .04) by the loan term. Add this number to the original principle to see how much you will pay.

Compound interest Compound interest is great for investors, but not so great for your bills. Compound interest is calculated on both the principal, and already accrued interest. This is how student loans, credit cards and many other forms of credit work. To calculate compound interest you must follow this formula:

Compound interest Compound interest includes the number of times per year that the interest is compounded. To help out, here are some frequent compounding interest terms. Also, the more frequently the interest is compounded, the more expensive the loan. Term Value in ‘n’ Annually 1 Semiannually 2 Quarterly 4 Monthly 12 Daily (Student Loans) 365

Save money- pay on the principal It is SO important to pay extra on your loans that have compounding interest. By doing so, you can save yourself hundreds, or thousands of dollars in the long run. Also, don’t forget, if you pay off the entire balance of your credit card by the end of each billing period, you don’t have to pay any interest at all! How great is that?!

Plenty of Online Calculators http://www.bankrate.com/calculators/home-equity/additional-mortgage-payment-calculator.aspx (use Firefox) https://www.dcu.org/account-services/calculators/loan-extra-payments.html

Simple vs Compound interest https://www.youtube.com/watch?v=gyiiqUQgEeA