To calculate the monthly interest, you first convert that annual rate to a monthly rate by dividing it by 12. For example, if you have a loan with an annual interest rate of 12%, your monthly interest rate would be 1% (because 12% divided by 12 months equals 1%). Then, to calculate the interest you owe each month, you multiply your outstanding loan balance by this monthly interest rate. So, if you have a $10,000 loan, your first month's interest would be $100 (because $10,000 times 1% equals $100). Keep in mind that this method only applies to simple interest calculation. If you want to take into account the compounding effect of interest being charged on interest, you can use our personal loan calculator.