1. What is Monthly Interest?

Monthly interest is the amount of interest earned or paid each month on a principal amount, based on an annual interest rate. It's commonly used in savings accounts, loans, and mortgages in the UK.

2. How Does the Calculator Work?

The calculator uses the monthly interest formula:

Where:

• \( P \) — Principal amount in pounds (£)
• \( r \) — Annual interest rate in decimal form

Explanation: The annual rate is divided by 12 to get the monthly rate, which is then multiplied by the principal amount.

3. Importance of Monthly Interest Calculation

Details: Calculating monthly interest helps individuals and businesses understand their interest earnings or payments, plan finances, and compare different financial products.

4. Using the Calculator

Tips: Enter the principal amount in pounds (£) and the annual interest rate in decimal form (e.g., 0.05 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert percentage rate to decimal?
A: Divide the percentage by 100 (e.g., 5% becomes 0.05).

Q2: Is this calculator suitable for compound interest?
A: No, this calculates simple monthly interest. Compound interest requires a different formula.

Q3: Can I use this for mortgage calculations?
A: This gives basic monthly interest, but actual mortgage payments include principal repayment and may use different calculation methods.

Q4: Why divide by 12 in the formula?
A: Because there are 12 months in a year, this converts the annual rate to a monthly rate.

Q5: Are the results accurate for all financial products?
A: Results are accurate for simple interest calculations. Some products may use daily interest calculations or other methods.