# Interest Rate Calculator

Use this calculator to work out the interest rate you are paying on your loan or receiving on your investment, and see the split between principal and interest.

#### 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.

## What is an interest rate?

An interest rate is a percentage that is charged by a lender to a borrower for an amount of money. You may be borrowing the money from someone (loan) or lending it to them (savings or investment).

Our interest rate calculator works on the basis of monthly compounding.

## How to calculate interest rate on a loan

Calculating the interest rate you're receiving on a loan requires a series of calculations involving your loan amount, monthly payment and number of payments made. 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, personal loan or car 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.

## 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 used in the compound interest calculator. We enter into the formula your current balance, original principal amount, number of compounds per year and time period.

Should wish to work out the rate of interest you might receive on an investment based upon a current value and future value, give the CAGR calculator a try.

## 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). 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}- 1
i = nominal interest rate

n = number of periods

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.

## What is APR?

APR stands for Annual Percentage Rate. It is included to give you a clear picture of what your loan might be costing you, taking into account any loan setup fees.

### 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.

**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.