How it works
There is no simple formula that gives the rate directly, so the calculator searches for it: it tries rates until the payments, discounted at that rate, add up exactly to the amount borrowed.
P = M × (1 − (1 + r)−n) ÷ r
- P — amount borrowed
- M — monthly payment
- n — number of payments
- r — monthly rate (the calculator solves for this; annual rate = r × 12)
If an offer is quoted as "only X a month", this is the quickest way to see what it really costs and compare it with a bank loan.