Math Tip of the Week - Figuring Out Interest

Did you know that you have to pay a fee to borrow money? It's called "interest," because the person or bank who loans you the money is interested in getting paid back!





How do we figure it out? Easy! Let's say you're buying a car.



Don't be afraid to dream big!!

This car is going to cost $75,000. Hey, I said, "DREAM BIG!!" :)






The rate at which the interest will accrue is 4%.

You will take 5 years to pay off the loan.


We want to find out how much actual interest you will pay on your loan.








First, we must find 4% of $75,000. We know that "of" means "multiply."

.04 x $75,000 = $3,000. This is the interest for 1 year, but we will be paying for 5 years, so we must multiply again by 5.


$3,000 x 5 = $15,000 This is how much total interest we will pay on the loan. That means that we will pay back the $75,000 we borrowed, plus we will pay an extra $15,000 fee (interest).


We can reduce the amount of interest we pay by borrowing a smaller amount, by getting a lower interest rate, or by paying the loan off in less time.