A loan of $5,000 is taken at a simple interest rate of 6% per year. How much interest is paid after 4 years?

Sun, 03 May 2026 04:38:46 +0000

**How Much Interest Do You Pay on a $5,000 Loan at 6% Simple Interest Over 4 Years?** Curious about how interest builds on a $5,000 loan at 6% per year? Many people are exploring this question as rising interest rates reshape borrowing habits across the U.S. Whether considering a personal loan for home improvements, debt consolidation, or lifestyle needs, understanding exactly how interest accumulates is key to making informed financial choices. This simple interest scenario involves lending $5,000 at a 6% annual rate—meaning interest grows only on the original amount, not on accrued interest. Over four years, this straightforward calculation reveals not just a total repayment amount, but the true cost of borrowing. Under the rules of simple interest, interest is calculated as: Principal × Rate × Time. Here, that’s $5,000 × 0.06 × 4, resulting in $1,200 in interest paid after four years. The total amount repaid becomes $6,200.