The total interest of a loan is the sum of all interest paid over the life of the loan. Different types of loans, however, can use different interest calculations. Personal loans typically use simple interest. This type of interest is only calculated on the principal of the loan; the interest won't be compounded, and you'll never pay interest on interest. For simple interest loans, fixed installment payments are determined by taking the interest rate, principal amount, and the number of periods (typically months) in the loan contract. At the beginning of the loan, the fixed payments will be split with a higher portion of the payment going towards the interest. As the principal is paid off, the interest portion of the payment will get lower.