How to use this interest rate calculator
- Enter the loan amount: the balance your payments repay. For a car, that is the price minus your down payment and trade-in, plus any taxes, fees or add-ons you finance.
- Enter the term in years and months. Five years is 60 payments; six years is 72.
- Enter the monthly payment from the offer or contract, counting only principal and interest.
- Add upfront fees (optional) such as an origination fee or points to see the APR, the number lenders must disclose.
- Check the payment table under the results to see how much the rate moves when the payment changes by $25 to $100.
How to calculate the interest rate on a loan
A fixed-rate loan is repaid when the present value of all the payments equals the amount borrowed:
A = M × (1 − (1 + r)^−n) / r, and annual rate = 12 × r
- A
- loan amount
- M
- monthly payment
- n
- number of monthly payments
- r
- monthly interest rate (the unknown)
There is no way to rearrange this equation to isolate r, so the rate is found by iteration: guess a rate, see whether the payments are worth more or less than the loan, and adjust. Spreadsheet functions and the federal APR rules (Regulation Z, Appendix J) use the same approach.
Worked example
Take A = $30,000, M = $600 and n = 60. At a trial rate of 0.5% a month, the 60 payments are worth $31,035 today, more than the loan, so the rate must be higher.
At 0.7% they are worth $29,314, less than the loan, so the rate is lower than that. Narrowing the range lands on
r = 0.6183% a month, and 12 × 0.6183% = 7.42% a year.
In a spreadsheet, =RATE(60, -600, 30000)*12 gives the same answer.
Interest rate vs. APR: what’s the difference?
The interest rate is the charge on your balance. The APR (annual percentage rate) is the cost of the credit as a yearly rate once upfront finance charges are included. Under the Truth in Lending Act, lenders must disclose the APR along with the amount financed, the finance charge (the dollar cost of the credit) and the total of payments.
Finance charges include interest, points and loan fees, plus charges such as credit report fees. Not every cost counts: application fees charged to every applicant and late fees are excluded, and for mortgages some bona fide real-estate fees like title and appraisal charges are too. Fees reduce the amount financed, so the same payments repay less money and the APR is higher than the interest rate. Here is the $30,000, 60-month example at $600 a month with different fees:
| Upfront fees | Amount financed | Interest rate | APR | Finance charge |
|---|---|---|---|---|
| $0 | $30,000 | 7.420% | 7.420% | $6,000 |
| $250 | $29,750 | 7.420% | 7.773% | $6,250 |
| $500 | $29,500 | 7.420% | 8.131% | $6,500 |
| $1,000 | $29,000 | 7.420% | 8.858% | $7,000 |
| $1,500 | $28,500 | 7.420% | 9.604% | $7,500 |
| $2,000 | $28,000 | 7.420% | 10.368% | $8,000 |
Interest rate by payment per $1,000 borrowed
Divide your payment by the loan amount and multiply by 1,000, then find that figure below. The example loan pays $20.00 per $1,000 over 60 months, which is 7.42%. A dash means the payments add up to less than the amount borrowed.
| Payment per $1,000 | 48 months | 60 months | 72 months | 84 months |
|---|---|---|---|---|
| $14.00 | — | — | 0.26% | 4.71% |
| $16.00 | — | — | 4.77% | 8.82% |
| $18.00 | — | 3.07% | 8.95% | 12.65% |
| $20.00 | — | 7.42% | 12.86% | 16.24% |
| $22.00 | 2.70% | 11.51% | 16.56% | 19.66% |
| $24.00 | 7.12% | 15.40% | 20.08% | 22.92% |
| $26.00 | 11.32% | 19.11% | 23.46% | 26.07% |
| $28.00 | 15.33% | 22.67% | 26.72% | 29.11% |
| $30.00 | 19.19% | 26.10% | 29.87% | 32.07% |
| $32.00 | 22.91% | 29.42% | 32.93% | 34.96% |
Why dealers quote a monthly payment instead of a rate
A monthly payment on its own can hide a longer term, a higher rate or extra products. Quoting a payment higher than the loan needs, then filling the gap with add-ons, is often called payment packing. The Federal Trade Commission warns car buyers not to focus solely on the monthly payment, notes that add-ons financed with the car are not free, and says the APR you negotiate with a dealer usually includes compensation for the dealer.
Here is how much room a $600 payment leaves on the $30,000 example:
- Same payment, longer term. Paying $600 for 72 months instead of 60 on the same $30,000 means a rate of 12.86%, not 7.42%.
- Same payment and rate, bigger loan. At 7.42% over 72 months, $600 a month repays $34,780, leaving $4,780 of room for a higher price or add-ons without changing the payment.
- Small payment changes matter. On this loan, each extra $25 a month is worth about 1.73 percentage points of rate.
To avoid this, the FTC suggests getting an out-the-door price in writing before you talk about financing. Then enter the amount, term and payment the dealer offers here, or run the numbers with our auto loan calculator.
Nominal vs. effective interest rate
Loan rates and APRs are nominal: Regulation Z defines the APR as the rate per period multiplied by the number of periods in a year, so it ignores compounding. Because loan interest is charged monthly, the effective annual rate is (1 + r)12 − 1, slightly higher. Savings accounts advertise an APY, which by federal definition does reflect compounding, so a loan’s APR and a deposit’s APY are not measured the same way.
| Nominal rate (APR) | Monthly rate | Effective annual rate | Difference |
|---|---|---|---|
| 5% | 0.4167% | 5.116% | 0.12 pts |
| 7.5% | 0.6250% | 7.763% | 0.26 pts |
| 10% | 0.8333% | 10.471% | 0.47 pts |
| 15% | 1.2500% | 16.075% | 1.08 pts |
| 20% | 1.6667% | 21.939% | 1.94 pts |
| 25% | 2.0833% | 28.073% | 3.07 pts |
| 30% | 2.5000% | 34.489% | 4.49 pts |
How to use your result to compare loan offers
- Compare APR to APR for the same term. The CFPB notes that dealers and lenders are not required to offer you the best available rates, so get at least one quote from a bank or credit union too.
- Check the math. Enter the amount financed, term and payment from the disclosure. If your result is higher than the quoted APR, ask what else is in the payment.
- Look at the total cost. A lower payment over a longer term usually means more interest. Compare the finance charge, not just the payment.
- Try a different term. Use the loan calculator or payment calculator to see the payment at a quoted rate, and the amortization calculator for the full schedule.
Typical interest rates for comparison
Averages are useful as a sanity check, but your own rate depends mostly on your credit score, the term and the lender.
| Loan type | Average rate | Period | Source |
|---|---|---|---|
| New car loan (all credit tiers) | 6.35% | Q2 2026 | Experian |
| Used car loan (all credit tiers) | 11.19% | Q2 2026 | Experian |
| 24-month personal loan (commercial banks) | 11.86% | Q2 2026 | Federal Reserve G.19 |
| 30-year fixed mortgage | 7.03% | Week ending Sep 24, 2026 | Freddie Mac PMMS |
| Credit card (accounts paying interest) | 22.15% | Q2 2026 | Federal Reserve G.19 |
| Credit tier (score) | New car | Used car |
|---|---|---|
| Super prime (781–850) | 4.41% | 6.29% |
| Prime (661–780) | 6.15% | 8.81% |
| Near prime (601–660) | 9.71% | 13.93% |
| Subprime (501–600) | 13.52% | 19.10% |
| Deep subprime (300–500) | 16.11% | 21.62% |
Data: Experian ; Federal Reserve G.19 ; Freddie Mac PMMS
Frequently asked questions
How do I calculate the interest rate on a loan?
Solve the loan-payment formula for the rate by trial and error, since there is no direct formula. Find the monthly rate at which your payments exactly repay the amount borrowed, then multiply it by 12. In Excel or Google Sheets, =RATE(60, -600, 30000)*12 returns 7.42% for a $30,000 loan paid at $600 a month for 60 months. This calculator does the same search for you.
What is the difference between an interest rate and an APR?
The interest rate is what the lender charges on the balance; the APR also counts upfront finance charges such as origination fees and points, spread over the life of the loan. On the $30,000, 60-month example loan, $1,000 in fees raises the APR from 7.42% to 8.858%. The Truth in Lending Act requires lenders to disclose the APR, so compare APRs with APRs.
Why is my calculated rate higher than the rate on my loan offer?
Usually because the payment covers more than the quoted rate. Common reasons are fees, service contracts or other add-ons rolled into the loan, a loan amount you entered without them, or a payment that includes insurance. A first payment due more than a month after signing also changes the math slightly. Ask the lender for the amount financed, finance charge and APR in writing and enter those numbers.
Is APR the same as the effective annual rate?
No. Under Regulation Z, an APR is a nominal rate: the monthly rate times 12, with no compounding. The effective annual rate adds the effect of monthly compounding, so it is higher whenever the rate is above 0%. For example, a 7.42% rate is 0.6183% a month, which compounds to an effective 7.678% a year. Savings accounts quote APY, which is an effective rate.
Is 0% financing really free?
It is interest-free, but it may cost you a rebate. If a dealer offers 0% on $30,000 for 60 months ($500.00 a month) or a $2,000 cash rebate instead, taking 0% means paying $500.00 a month on what is really a $28,000 purchase. That is the same as a 2.75% loan, so a lower rate elsewhere plus the rebate would be cheaper.
What is a good interest rate on a car loan?
A good car loan rate is one at or below the average for your credit tier. Experian’s Q2 2026 data put the average at 6.35% for new cars and 11.19% for used cars, ranging from 4.41% (new) for super-prime borrowers to 21.62% (used) for deep-subprime borrowers. Get a preapproval from a bank or credit union before visiting the dealer so you have a rate to beat.
Does a longer loan term lower the interest rate?
No. A longer term lowers the payment, not the rate, and the FTC notes that 72- or 84-month loans may have high rates. At the same 7.42%, stretching the $30,000 example from 60 to 72 months cuts the payment to $517.54 but raises total interest from $6,000 to $7,263. Keeping the $600 payment for 72 months instead implies a 12.86% rate.