How to use the Interest Rate Calculator (Find the Rate on a Loan)
- Enter the amount you will borrow.
- Enter the monthly payment you will make.
- Enter the loan term in years.
- Read the annual interest rate and the total interest you would pay.
Formula used
The monthly rate r solves P × r ÷ (1 − (1 + r)^−n) = payment, where n is the number of months. It is found numerically and then multiplied by 12 for the annual rate.
Worked example
Here is the Interest Rate Calculator (Find the Rate on a Loan) worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Loan amount | $25,000 |
| Monthly payment | $483 |
| Loan term | 5 years |
| Result | |
| Annual interest rate | 5.97% |
| Total of all payments | $28,980 |
| Total interest | $3,980 |
Reading the answer
With the default example, a loan of $25,000 repaid at $483 a month for 5 years has an interest rate of 5.97% a year. You pay $28,980 in total, of which $3,980 is interest.
The rate is the nominal yearly rate with monthly compounding, which is how most loans quote it. It is found by solving the standard repayment formula for the monthly rate, then multiplying by 12.
Why a small payment change matters
Payments are very sensitive to the rate, so the rate moves noticeably when the payment changes slightly. If the payment on the same loan were $600, the rate would be 15.4%. Over four years, a payment of $563 would imply 3.87%.
That also means a quote showing only a monthly payment can hide a high rate. Enter the figures from the paperwork and see for yourself.
When the calculator cannot find a rate
If the total of all payments is less than the amount borrowed, no positive interest rate can fit, and the calculator says so. That usually means a number was typed wrongly, or the payment shown does not cover the whole loan.
A payment exactly equal to the amount divided by the number of months means a rate of zero, which is common in promotional interest-free offers.
Rate versus APR
The result does not include fees, insurance or other charges, so it can be lower than the APR the lender must disclose, which spreads those costs across the loan. If a lender quotes both, compare this rate with the quoted one to see how much the extras add.
Use the loan comparison calculator to compare two offers once you know their rates.
Frequently asked questions
Is this the APR?
No. It is the nominal rate implied by the payment, which excludes fees unless you include them in the amount.
What if the loan has a balloon payment?
This calculator assumes equal payments that fully repay the loan, so a balloon payment is not covered.
Why does it show an error about low payments?
The payments must add up to at least the amount borrowed for any interest rate to exist.
Can I use it for a car loan?
Yes, enter the financed amount, the monthly payment and the term.
Does it assume payments at the end of each month?
Yes, which is how most loans work.
How accurate is it?
It solves the equation numerically to many decimal places, so the rate is accurate for the inputs you give.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.