Interest payments are typically calculated based on the principal amount borrowed, the interest rate, and the duration of the loan. The formula for calculating interest can vary depending on whether the loan uses simple or compound interest. Simple interest is calculated using the formula:
Interest = Principal × Rate × Time
For compound interest, the formula is:
A = P (1 + r/n)^(nt)
Where A is the amount of money accumulated after n years, including interest. P is the principal amount, r is the annual interest rate, n is the number of times that interest is compounded per year, and t is the time in years.