Most people think loan interest is simple — but most loans use monthly payments with compound interest, not simple interest.
- Most loans use monthly payments — not simple interest.
- Use this formula: Monthly Payment = P × [r(1 + r)^n] / [(1 + r)^n – 1]
P = loan amount,
r = monthly interest rate (annual rate ÷ 12 ÷ 100),
n = number of months. - Example: Borrow ₦100,000 for 12 months at 24% → r = 0.02
- Monthly Payment ≈ ₦9,392 → Total repayment = ₦112,704 → Interest ≈ ₦12,704
- Simple interest would say ₦12,000 — but annuity adds more.
- Most banks use annuity — not flat — even if they don’t say it clearly
👉 Don’t guess your repayment — use the right formula.