How it works
If you know how much you borrowed, what you pay each month and for how long, you can work backward to the interest rate. This is useful for checking a dealer quote, a buy-now-pay-later plan, or any loan where only the payment is advertised.
There is no closed-form formula for the rate, so the calculator solves the standard loan payment equation numerically until the payments exactly repay the principal.
If the loan amount you enter is the amount you actually received after fees, the result is effectively the APR.
Formula
Solve for r: loan = payment × (1 − (1 + r)^−n) ÷ r; annual rate = 12 × r
Questions people ask
Why can't the rate be calculated directly?
The payment formula cannot be rearranged algebraically to isolate the rate, so it is found by iteration, the same way spreadsheet RATE functions work.
What if the payments add up to exactly the loan amount?
Then the rate is 0%. Some promotional financing works this way.
Does this include fees?
Only if you enter the amount you actually received after fees. Then the result reflects the true cost of the loan.