How to Calculate Interest Rates The Easy Way

what is up I'm Jason with the honest finance Channel today I'm gonna quickly show you how to calculate simple interest on your calculator so that you can do it whenever you need to I'm not gonna be using formulas or anything fancy here I'm just going to be doing it the easy way so just pay attention and you'll know how to do it and trust me know that math is boring but you've got to understand how to do some simple math in order to make better financial decisions in your life so what is simple interest it's just the interest that accrues from the principal on either debt that you have or some kind of an investment that you have as well this would be like the interest you get from CD account at bank or the interest that you're paying on your car loan both of those are just based off simple interest so I'll just use both of these examples to teach you how to figure out simple interest on your own in real life so let's say that you want to put twelve thousand dollars into CD account at your bank that pays three percent year so now you want to know how much money you're gonna make an interest from that CD account so now is the point where I'll teach you how to do the math in your calculator just take the principal amount of money which is the twelve thousand dollars and multiply it by point zero three which is three percent in calculator and now we know that you're gonna be making three hundred and sixty dollars year for keeping twelve thousand dollars in that account at three percent interest it's as simple as that and that's all you need to do to figure out simple interest and now for the next example let's say that you have car loan balance of eighteen thousand dollars and you're paying 4.5 percent interest on that car loan and you probably want to know how much interest you're paying on that car so let's just do the math really quick so now just take the balance of the car which is $18,000 and multiply it by point zero four five which is four and half percent in calculator so according to the math that looks like you're currently paying about eight hundred and ten dollars year in interest on that car loan and if you want to figure out how much interest you're roughly paying by the month then just take the eight hundred and ten dollars an interest that you're paying on the yearly amount and divide it by twelve so currently you're paying about 67 dollars an interest month on that car loan but keep in mind that as you pay down your car loan the interest that you're paying is also going to go down as well and that's just because every month as you pay down your car the principal amount of money is going to go down as well and if you do want more information on how car loan interest works and just check out this video right here that video goes into more depth when it comes to your payment schedules and things like that with your loan so you see you don't need fancy formulas to figure out this kind of math you just need to know how to do it in your calculator so that you can use it in your real life I'm Jason with the honest finance Channel if you did find this video helpful feel free to subscribe to my channel like to talk lot about different financial topics or at least give this video like that's all