## Interest Rate Example

Next, we’ll illustrate using a real-world example showing how to use the Interest Rate calculator.
You will need a loan amount, the term of the loan, and your monthly payment. You can make these
numbers up to see the interest you will pay on various scenarios, or you may plug in actual loan
data.

Assume a friend wants to borrow $5,000 from you. They agree to pay the money back over two years (24
months) at $250 per month. Using the calculator, you, and them, can determine how much interest they
will be paying and the interest rate.

Input 5000 into the Loan Amount.

Put 2 into the Loan Term.

The Monthly Payments are 250.

Based on these parameters, you can see that the interest rate is 18.16% and the total Monthly
Payments are $6,000. Since the original loan amount was $5,000, the total interest paid is $1000.