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Interest Rate Calculator

Determine the effective interest rate of a loan from payment and term.

Loan Inputs

Annual Percentage Rate (APR)
7.420%
Monthly rate 0.6183%
Total Interest
$4,000.00
Total Paid
$24,000.00

How It Works

This calculator reverses the standard amortization formula to solve for the rate. With loan amount $20,000, monthly payment $400.00, and term 60 months, the effective APR is 7.420%.

What is the Interest Rate Calculator?

An interest rate calculator is a free online tool that determines the effective annual interest rate (APR) of a loan from the loan amount, monthly payment, and term. Use it to compare financing offers, evaluate the true cost of credit, and check that a quoted rate matches the actual payments.

Interest Rate Calculator formula

Solve for r in M = P × [r(1+r)^n] / [(1+r)^n − 1], where M is the monthly payment, P is the principal, and n is the number of months. The result r is the monthly rate; multiply by 12 (or compound) to get the APR. There is no closed-form solution — the rate is solved numerically (typically Newton's method).

How to use the Interest Rate calculator

  1. 1Enter the loan amount (principal).
  2. 2Enter the monthly payment you're making.
  3. 3Enter the loan term in months or years.
  4. 4Click calculate to solve for the APR.
  5. 5Optionally add fees to compute the true APR including closing costs.

Example calculation

A $20,000 loan repaid with $482.66 monthly payments over 48 months has an effective APR of about 7.42%. Borrowers can use this to compare dealer financing against credit-union loans when the stated rate is unclear or hidden in fees.

Frequently asked questions

How do you calculate the interest rate on a loan?
If you know the loan amount, monthly payment, and term, solve for r in the amortization formula M = P × [r(1+r)^n] / [(1+r)^n − 1]. There's no algebraic solution — financial calculators use iterative methods like Newton's method or bisection.
What is the difference between APR and APY?
APR (annual percentage rate) is the simple annual rate charged on a loan, ignoring compounding within the year. APY (annual percentage yield) is the effective annual rate that includes compounding. For a 12% nominal rate compounded monthly, APY = (1 + 0.12/12)^12 − 1 = 12.68%.
What is a good APR for a personal loan?
Borrowers with good credit typically see personal loan APRs of 7–12%. Borrowers with excellent credit (760+) can sometimes qualify for rates below 7%, while fair-credit borrowers (640–699) often receive 18% or higher.
Is a lower APR always better?
Usually yes, but check the term. A 36-month loan at 9% APR often costs less total interest than a 72-month loan at 6% APR, because the longer term means more months of interest charges. Always compare total cost, not just the rate.

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