You want to buy a car. The dealership shows you a $35,000 vehicle. They offer financing at 6.5% interest over 60 months. But what will you actually pay per month? And what is the total cost of the loan? The math involves compound interest, which is not intuitive. If you tried to calculate it by hand, you would need loan amortization formulas that most people don't remember from high school algebra. You could ask the dealership's finance manager. But they have an incentive to make the payment sound acceptable without emphasizing the total interest cost. Or you could use a loan calculator to instantly show that a $35,000 car at 6.5% over 60 months costs $644/month and $38,657 total (meaning you pay $3,657 in interest alone). A loan calculator computes the monthly payment, total interest, and complete cost of borrowing by applying compound interest formulas to the loan amount, interest rate, and term. It also generates an amortization schedule showing exactly how each payment is s...