Enter your loan amount, payment, and term to find the implied interest rate.
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Based on your inputs
| Loan Principal | $200,000 |
|---|---|
| Monthly Payment | $1,200 |
| Term | 360 months (30.0 years) |
| Monthly Interest Rate | 0.0010% |
| Annual Interest Rate (APR) | 0.012% |
| Total Paid | $432,000 |
| Total Interest | $232,000 |
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For an amortizing loan (mortgage, auto, personal), the relationship between principal (PV), monthly payment (PMT), monthly rate (r), and term in months (n) is:
PMT = PV × r × (1+r)^n / ((1+r)^n - 1)
If you know PV, PMT, and n, you can solve for r using numerical methods (iteration). This is what our calculator does.
Comparing two $250,000 auto loans:
• 4% for 60 months: $4,606/month, total paid = $276,360
• 8% for 60 months: $5,074/month, total paid = $304,440
That 4% rate difference costs $28,000 more. For mortgages, the difference is even larger.
1. Credit score is king: 760+ gets the best rates. Every 20 points below costs 0.1-0.25% more.
2. Shop at least 3 lenders: rate differences of 0.5-1% are common between lenders.
3. Consider a shorter term: 15-year mortgage rates are 0.5-0.75% lower than 30-year.
4. Larger down payment: 20% down avoids PMI and may get a better rate.
Enter your loan amount, monthly payment, and loan term. The calculator uses Newton's method to solve the loan payment formula for the unknown rate.
Under 5% is excellent, 5-8% is good, 8-12% is average. Anything above 15% is high — consider improving credit first.
On a $300,000 30-year mortgage, 1% higher rate = $60,000+ more in total interest. Small rate differences compound into enormous amounts.
Improve credit score (740+ gets best rates), make a larger down payment (20%+ for mortgages), shorten loan term, comparison shop at least 3 lenders, and consider buying points to reduce rate.
Interest rate is the base borrowing cost. APR includes fees (origination, points, mortgage insurance). APR is always ≥ interest rate. Use APR to compare loans accurately.
The interest rate is the base cost of borrowing money. APR includes the interest rate plus fees, points, and other costs expressed as a yearly percentage. APR gives a more accurate picture of total borrowing cost for comparing loan offers.
Divide the annual interest rate by 12 to get the monthly rate, then multiply by the remaining loan balance. On a $200,000 loan at 6% annual rate, monthly interest is 0.5% times $200,000 equaling $1,000 for the first month.
Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal plus any accumulated interest. Compound interest grows faster because you earn interest on your interest over each compounding period.
The Fed sets the federal funds rate which influences all borrowing costs. When the Fed raises rates, mortgage, auto loan, credit card, and personal loan rates typically increase. Variable rate loans are affected immediately while fixed rates change on new loans.
Excellent credit scores of 750 or higher qualify for rates of 6-10%. Good credit of 700-749 gets 10-15%. Fair credit of 640-699 sees 15-22%. Rates below 10% are generally considered good for personal loans in the current rate environment.
PMT = PV × r × (1+r)^n / ((1+r)^n − 1)
Solved for r (monthly rate) given PV, PMT, and n using Newton's method.
Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.
Found an error in a formula or source? Report it →
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.