# Interest Rate Calculator

If you are feeling confused about what **Nominal Interest Rate and Annual Percentage Rate (APR)** you are receiving on your loan, I hope that my simple interest rate and APR calculator will prove
helpful to you. Enter your principal loan amount, the amount you are paying each month and the number of months that the loan is for (as well as any setup fees for your loan). Note that this
calculator uses the Newton-Raphson method for calculating interest rates and requires JavaScript.

#### Disclaimer

Whilst every effort has been made in building the interest rate calculator tool, we are not to be held liable for any special, incidental, indirect or consequential damages or monetary losses of any kind arising out of or in connection with the use of the calculator tools and information derived from the web site. This tool is here purely as a service to you, please use it at your own risk.

The calculations given by the interest rate calculator tool are only a guide. Please speak to an independent financial advisor for professional guidance. Read the full disclaimer.

## Interest rate calculator - FAQ

### What formula is used in this calculator?

This calculator uses the Newton-Raphson method to calculate the interest rate. This is a complex process resulting in a more accurate figure for the interest rate. The Newton-Raphson method is used to choose a series of values to try, then converging on the answer once the equation balances.

### Why do the figures for total payments differ slightly compared to my own figures?

You may notice a small difference between the total payments and total interest figures listed by the calculator and your own figures. This is due to the rounding in your monthly payment figure. When working out your monthly payment figure on your loan quote, your figure will be rounded up or down to two decimal places. So, when you multiply it by the months of the loan (as this calculator does), the total figure will come up either slightly low or high.

### What is APR?

APR stands for **Annual Percentage Rate**. It is included to give you a clear picture of what your loan is going to cost you,
**taking into account any loan charges and setup fees**.

In simple terms, the APR figure is a representation of how much it would cost you to borrow each dollar or pound for each year of your loan. So, for example, at 30% APR you would effectively be paying 30 cents interest on each dollar you're borrowing, per year. At 300% APR, you would be paying $3 in interest per year on every dollar borrowed.

**APR Example**: If you borrow $1000 at 20% APR for a year, you'd have to pay back the loan plus $200 interest. A total of $1200.

For a more detailed explanation of APR, take a look at our article, What is APR?

### What is 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:

**Interest rate = n ◊ ( (1 + r) ^{1/n} - 1)**

r = effective annual rate.

n = number of compounding periods per year.

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

It can be confusing to decipher the interest rate you're paying on your loan when examining all of the figures on your loan statement or documentation. However, fear not. If you enter your loan information into the calculator above, it will calculate your interest rate and your APR figure, giving you a clear indication of what you are paying.

### What are the different types of loan?

There are many different variations of loan available in the world today. Common types incude open-ended loans, closed-ended loans, secured loans, unsecured loans and payday loans. Interest rates will vary on these, sometimes quite dramatically, depending on the type of loan and your personal circumstances. At the lower end of the spectrum, as far as interest rates are concerned, are secured loans. Attracting far higher rates of interest are payday loans. You can read more about the different types of loan in our article, 5 of the most common bank loans and how they work.

### Other calculators

If you need to calculate a percentage figure for a statistic or work out how much your assets have risen or fallen by, give the percentage calculator a try. Alternatively, for assistance calculating returns on investments, see the IRR calculator and CAGR calculator.

**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.