Interest Rate Calculator
Calculate the interest rate on a loan or investment given the principal, payment amount, and term.
Input Parameters
Results
Solving for Interest Rate
When you know the loan amount, monthly payment, and term, you can back-calculate the interest rate being charged. This is useful for verifying loan offers or understanding the true cost of financing.
What is the Interest Rate Calculator?
The Interest Rate Calculator is a reverse-engineering tool. If you know how much a monthly payment is, and you know how much the original loan was, this tool will algebraically solve for the hidden interest rate the bank is charging you.
How It Works (Algorithm)
Because the interest rate ($r$) exists in both the numerator and as an exponent in the denominator of the standard amortization formula, it cannot be isolated using basic algebra. The calculator uses iterative numerical methods (guessing thousands of rates per second) to find the exact match.
$$ PMT = P \frac{r(1+r)^n}{(1+r)^n - 1} $$
The tool iteratively solves for $r$ using the Newton-Raphson method.
How to Use It
Enter the original loan amount. Enter the total number of months the loan lasts. Finally, enter your exact monthly payment. The calculator will instantly reverse-engineer the math and output the exact annual interest rate.