Checking an advertised payment
A $20,000 loan over 5 years with $400 monthly payments implies an annual rate of about 7.42%.
Loan interest rate calculator
This is an estimate for information only. It is not financial advice and does not replace the rate disclosed in your loan agreement.
Result
Fill in the fields to see your result.
How it works
The loan-payment formula relates amount, rate, term and payment, but it cannot be rearranged algebraically to isolate the rate. This calculator instead searches numerically for the rate that makes the formula balance exactly.
This is the same rate you would get from a spreadsheet's RATE function, expressed as a nominal annual rate compounded monthly.
Formulas used
What is being solved
P = M × (1 − (1 + i)^−n) ÷ i, solved for i
- P
- loan amount
- M
- monthly payment
- n
- number of payments
- i
- monthly interest rate (unknown)
Worked examples
A higher payment implies a higher rate
The same loan and term with a $450 payment instead implies a much higher annual rate, near 12.5%.
Assumptions and limits
- Payments are equal, monthly and on time for the entire term.
- The rate found is nominal annual, compounded monthly.
- No fees are included unless you have already added them to the loan amount.
Frequently asked questions
Why can't the rate be calculated directly?
The loan payment formula mixes the rate both inside and outside an exponent, which has no algebraic inverse — it must be found by trial, which is what this calculator automates.
Is this the same as the APR?
It is the nominal annual rate compounded monthly implied by the payment. A true APR also folds in fees, which this calculator does not know about unless you include them in the amount.
What if the calculator shows an error?
That usually means the payment is too small to ever pay off the loan (it barely covers or misses covering interest) — increase the payment or check the term.
Can I use this for a car or personal loan?
Yes — it works for any fixed-payment, fixed-term loan, regardless of what it is used for.
Updated
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