1. What is the Interest Calculation Formula?

The simple interest formula calculates monthly interest for financial products in the Philippines based on principal balance and monthly interest rate.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( P \) — Principal balance in PHP
• \( R \) — Monthly interest rate (annual rate / 12, as a decimal)
• \( I \) — Monthly interest in PHP

Explanation: The equation converts annual rate to monthly rate by dividing by 12, then multiplies by principal to get monthly interest.

3. Importance of Interest Calculation

Details: Accurate interest calculation helps Filipinos understand loan costs, compare financial products, and plan repayments.

4. Using the Calculator

Tips: Enter principal in PHP and annual interest rate in percentage. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this for simple or compound interest?
A: This calculates simple monthly interest. For compound interest, a different formula is needed.

Q2: Are Philippine bank rates typically monthly or annual?
A: Most Philippine banks quote annual interest rates, which need to be divided by 12 for monthly calculations.

Q3: Does this include taxes or fees?
A: No, this calculates gross interest before any deductions. Actual bank products may have additional charges.

Q4: What's a typical interest rate in the Philippines?
A: Rates vary by product (loans 5-15%, savings 0.1-2.5% annually). Always check with your bank for current rates.

Q5: How accurate is this for variable rate products?
A: This assumes fixed rates. For variable rates, you'd need to recalculate when rates change.