Hello, does anyone know how to calculate interest owed on a debt dating back to 2001?

Answer 1

FV = P(1 + r) to the power of n

fv is the total, p is the original debt, r is the rate of interest, n is the number of years

Answer 2

You need to know what rate of Interest is being applied for each 'period' of the loan.

I expect the rates will have changed over the last 5 years, so you need to know the EXACT dates Rates changed and how long each Rate was applied for.

For example, if interest is calculated monthly (for example a typical Bank loan), then you need to know the rate for each month. If Interest is applied daily (eg. loan shark / Bank Overdraft) you need to know the daily rate.

If you owe money to Inland Revenue etc. then the rates applied for each past year will be published on their Web Site.

Once you have a list of the rates you then perform the necessary calculations.

Lets assume you owe X amount and the Interest rate is 0.5% per month for the first 12 months.

At end of Month 1. You owe X + 0.5% = (100.5% of X).
At end of Month 2. You now owe (100.5% of X) plus 0.5% of (100.5% of X) = [101.0025% of X]

At end of month 3, this totals [101.50751%] of X and so on.

After 12 months you will owe 106.16772% of X
(As you can see, "0.5% a month" comes to more than 6% a year when the interest is applied monthly. This is because you are paying 'interest on the interest').

SO - first step is to discover what Interest Rates have been used & how often they are applied.

Good Luck !