A loan of $5000 is taken at an annual interest rate of 6%, compounded annually. What is the amount owed after 3 years?

Sat, 02 May 2026 08:49:48 +0000

**How a $5,000 Loan at 6% Annual Interest Grows Over 3 Years — and What That Means for Borrowers** Why are more U.S. consumers turning their attention to small business and personal loans right now? With inflation holding steady and financial planning becoming increasingly urgent, a straightforward $5,000 loan at 6% compounded annually is drawing curiosity. This isn’t just a number—it’s a benchmark for understanding how even modest borrowing costs affect long-term finances. Understanding exactly what money owes after interest can empower smarter decisions. **Why This Loan Format Matters in Today’s Economy**
At 6% annual interest, compounded yearly, the loan scales predictably. Simple interest isn’t applied each month, but rather tallied once per year—making it easier to visualize long-term costs. In a climate where every dollar counts, knowing this amount owed after three years creates transparency. Many Americans are re-evaluating how they manage debt and credit, especially after rising living expenses and tighter household budgets. This loan structure illustrates how small amounts grow meaningfully when compounded—emphasizing the importance of awareness in financial planning. **How Compound Interest Works on a $5,000 Loan Over Three Years**
The calculation follows a clear formula:
**A = P(1 + r)^t**
Where:
- A = final amount owed
- P = principal ($5,000)
- r = annual rate (6% = 0.06)
- t = time in years (3)