How Much Does It Cost to Borrow? Use This Example. Let’s say you’re comparing two $10,000 loans for 3 years at 5% interest: Even with the same interest rate, how it’s calculated affects how ...

For example, if you take out a five-year loan for $20,000 and the interest rate on the loan is 5 percent, the simple interest formula would be $20,000 x .05 x 5 = $5,000 in interest. Who benefits ...