Calculate the total interest you'll pay over the life of a loan and see how different factors affect your total cost.
Cumulative interest is the total amount of interest you'll pay over the entire life of a loan. It represents the true cost of borrowing money and can often exceed the original loan amount, especially for long-term loans like mortgages.
For a $250,000 loan at 6.5% interest for 30 years:
Your monthly payment would be $1,580.17
You would pay $318,861.20 in interest over the life of the loan
The total cost of the loan would be $568,861.20
Several factors affect cumulative interest:
• Make extra payments whenever possible
• Choose a shorter loan term if affordable
• Make bi-weekly instead of monthly payments
• Refinance to a lower interest rate when possible
• Make lump-sum payments when you have extra funds
Even small extra payments can significantly reduce your total interest costs over the life of a loan.
The monthly payment is calculated using:
Where:
M = Monthly payment
P = Principal loan amount
r = Monthly interest rate (annual rate ÷ 12)
n = Total number of payments (loan term in years × 12)
Total interest is calculated as:
Extra payments reduce the principal balance faster, which reduces the interest charged on subsequent payments. Even small regular extra payments can save thousands in interest and shorten the loan term significantly.
Small differences in interest rates have a large impact on cumulative interest:
• 5% on $250,000: $233,139 total interest
• 6% on $250,000: $289,595 total interest
• 7% on $250,000: $349,266 total interest
• 8% on $250,000: $411,852 total interest