Interest Rate Calculator
The Interest Rate Calculator works backward from a known loan amount, monthly payment, and term to find the annual interest rate being charged.
Estimated Annual Interest Rate
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How the rate is found
Unlike solving for a payment, there's no simple algebraic formula to isolate the interest rate directly from the amortization equation, so this calculator uses a numerical search (bisection method): it repeatedly tests candidate rates, checks the resulting payment against your target, and narrows in until the calculated payment matches within a very small margin of error.
M = P × [r(1+r)n] / [(1+r)n − 1]
Example: A $20,000 loan paid off with $450/month over 4 years works out to an annual interest rate of approximately 8.0%.
When this is useful
This is handy for reverse-engineering the rate on an existing loan when only the payment and term are known, or for comparing the effective rate of a "same as cash" financing offer. See the Loan Calculator to go the other direction.