Calculate interest income on a loan
Enter the loan amount, annual rate, term and repayment type. See interest income on the balance outstanding by year, with net interest income after funding.
Total interest income
A loan of €10,000.00 at 12% over 36 months earns €1,957.15 of interest income, €1,041.56 of it in the first 12 months.
After funding at 4% the net interest income is €1,304.77, a net interest margin of 8.00% on an average balance of €5,436.53.
Interest income by year
Interest income falls each year as the balance is repaid, and the dark bar shows what remains after funding cost.
Yearly results
| Year | Opening balance | Interest income | Funding cost | Net interest income | Principal repaid |
|---|---|---|---|---|---|
| 1 | €10,000.00 | €1,041.56 | €347.19 | €694.37 | €2,944.16 |
| 2 | €7,055.84 | €668.17 | €222.72 | €445.45 | €3,317.55 |
| 3 | €3,738.30 | €247.42 | €82.47 | €164.95 | €3,738.30 |
| Total | €1,957.15 | €652.38 | €1,304.77 | €10,000.00 |
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Calculation method
Interest income = Opening balance × Annual rate ÷ 12 (Monthly) Annuity: Principal repaid = Instalment − Interest income; Equal principal: Loan amount ÷ Term; Interest only: Loan amount Repaid at end Funding cost = Opening balance × Funding rate ÷ 12 Net interest income = Total interest income − Funding cost Net interest margin = Net interest income ÷ Average balance by year
Interest is earned on the balance outstanding, so it falls as the loan is repaid. The calculation leaves out fees, defaults, prepayments and taxes.
What is interest income
Interest income is earned on the balance outstanding of a loan. The monthly calculation uses the balance at the start of the month and the annual rate.
As principal is repaid, the balance falls and so does interest income. The yearly results show interest income alongside funding cost, net interest income and net interest margin.
Interest income FAQs
What is interest income?
Interest income is earned on the balance outstanding. The calculator works it out each month using the annual rate.
How do you calculate interest income on a loan?
Multiply the balance at the start of each month by the annual rate, then divide by 12. Add the monthly interest income over the loan term.
Why does interest income fall as a loan is repaid?
The balance outstanding falls as principal is repaid. Because interest is calculated on that balance, interest income falls over the loan term.
What is net interest income?
Net interest income is interest income minus funding cost. The tool applies the funding rate to the same balance outstanding.
How is net interest margin calculated?
Net interest margin is net interest income divided by the average balance for the year. The average balance is the sum of monthly balances divided by 12.