Sometimes you are told the payment but not the rate — on a car deal or a store finance offer, for example. Enter the amount borrowed, the monthly payment and the number of payments to find the annual rate.
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.
Common questions
Why does the dealer's rate differ from mine?
Check that the amount includes any fees rolled into the loan and that the number of payments is right. A balloon payment at the end also changes the result.
Is this the APR?
If the amount you enter is what you actually receive after fees, the result is the APR. If fees were added to the loan, it is the plain interest rate.