# Interest Rate Calculator

**Disclaimer:** Whilst every effort has been made in building our calculator tools, we are not to be held
liable for any damages or monetary losses arising out of or in connection with their use. Full disclaimer.

## What is my interest rate?

Use our interest rate calculator to work out the interest rate you're receiving on credit cards, loans, mortgages or savings. An interest rate is a percentage that is charged by a lender to a borrower for an amount of money. This translates as a cost of borrowing. You may be borrowing the money from someone (loan) or lending it to them (savings or investment).

For common types of savings accounts and investments, you may be earning compound interest on your balance. This means that interest is calculated based upon your initial principal plus the interest already earned.

When calculating the interest rate you're receiving, you therefore have to compound the nominal interest rate to find an effective rate that includes the compounding. Of course, there may be some occasions where you may be loaning money, or receiving money, on the basis of a simple interest investment, without compounding. This means that interest is only calculated on the balance, not on the previously acrued interest.

## What interest rate am I paying on my loan?

Calculating the interest rate you're receiving on your credit card or loan requires a series of loan calculations involving your initial loan amount, number of payments made and either the monthly payment or interest paid.

Our calculator uses the Newton-Raphson method to calculate the interest rates on loans. This is a complex process resulting in a more accurate interest rate figure. The Newton-Raphson method chooses a series of values to try, and then converges on the answer once the equation balances.

Whether you've taken out a mortgage or loan, it can be difficult to decipher the interest rate you're paying on it.
That's where our calculator steps in, giving you a clear indication of what you may be paying. **Note that our interest rate calculator uses monthly compounding**.

If you'd like to use a spreadsheet to calculate your interest, give this simple loan calculator spreadsheet from Vertex42 a try.

## What interest rate am I receiving on my investment/savings?

To calculate the rate of return on an investment or savings balance, we use an adapted version of the compound interest formula that we've featured in many of our calculators. We enter into the formula your current balance, original principal amount, number of compounds per year and time period and the formula gives us a resulting interest rate.

It's worth noting that we also have other options for investments involving calculation of future values and returns. Should you wish to work out the rate of interest you've received on an investment based upon a current and future value, you can use our calculator for compound annual growth rate. If you're wondering how much money you might stand to make from a future investment, try calculating the internal rate of return.

### What is the nominal interest rate?

Nominal interest rate is the interest rate figure before an adjustment for inflation is taken into account. The formula for nominal interest rate is:

**Nominal interest rate = n × ( (1 + r)**

^{1/n}- 1)r = effective interest rate

n = number of compounding periods

### What is the effective interest rate?

The effective annual rate is the interest rate earned on a loan or investment over a time period, with **compounding** factored in. It can also be referred to as the annual equivalent rate (AER) or APY.

To give an example, a 5% annual interest rate with monthly compounding would result in an effective annual rate of 5.12%. This is because monthly interest is effectively accrued on top of previous monthly interest. The more times interest is compounded within the time period, the higher the effective annual rate will be.

**Effective interest rate = (1 + (i/n) )**

^{n}- 1i = nominal interest rate

n = number of periods

### What is the APR for my loan?

The Annual Percentage Rate (APR) includes the setup fee charged by your lender as part of your overall interest calculation, averaged over 12 months. It can give an indication of exactly how much your mortgage, vehicle loan or fixed rate loan is costing you.

To learn more about the types of interest rates referenced in the calculator, read our article about the differences between nominal, effective and APR interest rates.

**Note:** The interest rate calculator is provided for information purposes only. Please speak to an independent financial advisor for any kind of advice on loans.