How to Convert Monthly Interest Rate to APR
Some people confuse the interest rate of the loan with the APR, or the annual percentage rate. In some cases, these two rates are equal, but in other instances, the APR is higher than the interest rate. Lenders are required to disclose the APR for loans in most cases. If a lender quotes you a monthly interest rate, you should convert it to an APR to get a better idea of the cost per year. This is a complex computation that you must convert using online software.
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Instructions
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Preparation
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Multiply the monthly rate by 12 to get the yearly interest rate. For example, if the monthly rate is 1 percent, the yearly rate is 12 percent.
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Determine the term of the loan in months as well as the principal amount. For instance, 10 years, or 120 months, for a $10,000 loan.
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Find any additional finance fees associated with the loan, such as origination fees or dealer financing costs. For example, two points on a $100,000 loan equals $2,000 in additional costs.
Calculation
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Use the APR calculator offered by eFunda to figure the APR based on your data. Enter all four pieces of information -- loan amount, term, extra cost and yearly rate -- and then press "Calculate." You can also view the total amount of interest you'll pay over the course of the loan.
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Calculate the APR using the Local Lender website. This is a mortgage APR calculator that allows you to break your extra costs up by points and extra mortgage loan fees, like processing costs. Enter the rest of your loan information, then press "Click to Calculate APR" to see the APR.
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Enter your mortgage details on the MortgageFit APR calculator as another option. Enter the additional cost associated with the loan, whether it's a mortgage or other loan, then enter your rate, term and principal. When you press "Calculate APR," the tool displays the APR along with your loan amortization table.
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