METHOD
Formula and method
Solves the annual rate that equates the present value of repayments to net loan proceeds. Each payment time equals month number / 12.
Effective annual interest rate from loan payments and mandatory fees
Compare the annual cost of a loan with equal monthly payments and all known mandatory charges.
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Your inputs
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02
Your result
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About this result
Official APR uses actual dates and prescribed 365/366-day rules. This model excludes multiple drawdowns, variable rates, balloon repayments, collateral deposits and irregular dates. Missing mandatory costs understate the result.
Full disclaimerNominal and effective interest rate: what is the difference?
The nominal and effective interest rates differ because the effective rate also reflects mandatory fees and the monthly repayment pattern, not just the nominal interest. The calculator finds the annual rate at which the present value of all payments and mandatory costs equals the loan amount minus upfront costs. The result is an estimate for equal monthly intervals, not the official effective rate a bank discloses, which uses actual dates. For example, a 10,000 KM loan with 250 KM of upfront costs and 60 payments of 198.01 KM gives an estimate of 8.37% a year. Leaving out mandatory fees understates the result.
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