Credit & Debt
Interest in the first payment
Interest for the month is charged on the opening balance, so multiplying the balance by the monthly rate gives the interest before any of the payment is applied.
The Formula
first-month interest = r x B
Interest for the month is charged on the opening balance, so multiplying the balance by the monthly rate gives the interest before any of the payment is applied.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| r | Monthly rate | percent | Annual rate divided by twelve. |
| B | Balance | currency | The amount outstanding at the start. |
| I_1 | First-month interest | currency | Interest charged in the first month. |
What Each Symbol Means
rpercent
Monthly rate
Annual rate divided by twelve.
Bcurrency
Balance
The amount outstanding at the start.
I_1currency
First-month interest
Interest charged in the first month.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to pay off debt page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Pay Off Debt, filed under Finance. Every number the guide produces comes from substituting into this one line.