Interest Changes the Total
Calculate the total repayment on a loan by applying compound interest over the repayment period — and use that total to understand the true cost of borrowing.
In this lesson
Interest Changes the Total is part of Using Credit Carefully. This preview shows how credit-foundations connects to everyday family decisions such as earning, saving, spending choices, goals, approvals, or parent-guided money conversations inside Progress Penguin.
Think about this money choice
Kemi borrows 10000 in local currency at 5% monthly interest. She plans to repay it in three months.
How it works
To calculate the total repayment on a loan with monthly interest, multiply the principal by the interest rate for each period and add the interest to the outstanding balance. Over multiple periods, interest compounds — you pay interest on interest. Understanding this calculation tells you the true cost of borrowing before you commit.
Apply it to a real decision
Real-life money moment: Kemi borrows 10000 in local currency at 5% monthly interest for three months. Month 1: balance 10000 in local currency + 5% = 10500 in local currency. Month 2: 10500 in local currency + 5% = 11025 in local currency. Month 3: 11025 in local currency + 5% = 11576 in local currency. Total repayment: 11576 in local currency. The interest cost: 1576 in local currency on a 10000 in local currency loan — 15.76% over three months.
Activity preview
Test the trade-off
Use the lesson to complete this short practice activity.
Try one real money action
Open Tasks and submit proof for one task, or open Requests and make a deposit request. Parent approval can happen later.
Quiz preview
Interest changes the total cost because:
Borrow 100000 in local currency at 20% annual interest for one year. Total repayment: