Loan Interest Rate Calculator
Given the loan amount, term and monthly payment, the Loan Interest Rate Calculator solves for the annual interest rate (APR) the lender is effectively charging — useful when comparing offers stated as payments.
What this means
Lenders often advertise a monthly payment instead of a clear rate. This calculator reverses the amortization formula to reveal the true annual percentage rate.
How we calculate it
Formula
Solve M = P × [ r(1 + r)^n ] / [ (1 + r)^n − 1 ] for r using numeric bisection; APR = r × 12 × 100.Worked example
A $25,000 loan over 60 months with a $471.78 payment:
- 1The payment implies a monthly rate of 0.4167%
- 2Annual rate = 0.4167% × 12 = 5.0%
Important assumptions
- The loan is fully amortizing with equal monthly payments.
- No fees are bundled into the payment.
Frequently asked questions
What is APR?
APR is the annual cost of borrowing including fees, expressed as a yearly rate. It is the best number for comparing loan offers.
Why compare offers by rate not payment?
A longer term can hide a higher rate behind a similar payment. Comparing rates reveals which offer is truly cheaper.