# Interest Rate Calculator

Interest rates matter! They matter a lot, and you should definitely be interested in interest rates. With all finance products – whether savings, mortgages, or loans, you need to ask, **‘What is my interest rate?’**

**What Is My Interest Rate?**

Using our interest rate calculator will help you work out the interest rate you are receiving on any of the products or cards you may have – loans, savings, mortgages, credit cards. It is vital you know these rates.

Interest rates are percentages that are charged by a lender or bank to any borrower of money. Whether the amount of money is big or small, for the lender to make profit they will need to charge an interest rate, and the rate they charge – which is not always as easy to know as you might like – can be a major factor in your own finances, so you need to be well armed with knowledge. Check out the site for the IRR Calculator, the APR Calculator, and the Loans Calculators, among others, to look into this area in more detail.

If you lend money to a friend or to a colleague, then you too need to know how much you will make as profit by doing so at a particular rate. Borrower or lender, interest rates matter.

**Compound or Simple**

These are types of interest. Most savings accounts will offer you an interest rate that enables you to earn compound or simple interest on your balance.

If it is compound interest, you will receive interest on the interest that has already been accrued and that is then added to your previous balance. This princess can in principle generate very good returns. Look at our Compound Interest Calculator to see the difference this makes and the formula to use.

If you are only ever paying interest on the balance or the initial loan amount, then this is a simple interest approach, and you do not get the effect of compounding as the interest is not added to your prior balance.

**What interest are you paying on your loan?**

There are a number of ways of calculating loan interest payments so look at our Loans Calculators to see how to calculate what you are paying the banks or lenders in interest! It can be an incentive to pay down your loan balance as fast as you can.

Be aware that calculating loan interest is tricky and complex without the aid of our calculators, so use them as much as you need to in order to make sure you are truly aware of what you are paying in interest. It can often be helpful to set yourself up a spreadsheet to track your payments over time.

**Calculating interest rates on your savings**

This is an important thing for us all to do. To do so, we adapt the compound interest formula we used in our Compound Interest Calculator. Go to this calculator and enter into the formula these components:

Step | Step Description |
---|---|

1 | Your existing balance |

2 | The original Principal amount |

3 | The number of compounds per year – for example 12, if it is compounded monthly, or 4 if it is compounded quarterly |

4 | The time period involved |

This will then calculate to give you your interest rate.

Check out our other calculators involved in this area too. For example, our Calculator for Compound Annual Growth Rate is an excellent calculator to illustrate to you the power of compounding in savings, especially if you are able to save for the long term with regular contributions.

**Calculating the Nominal Interest Rate – and what it is!**

This is another important interest rate to be aware of. The nominal interest rate (NIR) is the rate of interest before any adjustment is made for inflation or any wider policy related charges that might affect your policy over time.

The formula for calculating it is:

NIR = n * ( (1 + r) ^ {1/n })-1

r = effective ~interest ~rate

n = number ~of ~compounding ~periods

**Calculating the Effective Interest Rate**

This required a different formula. This is also a different rate, as this is the rate when compounding mistaken into account. You may also see it referred to as the Annual Equivalent Rate.

EIR = (1 + (i/n) )^n - 1

i = nominal ~interest ~rate

n = number ~of ~compounding ~periods

Example – here is what the EIR is when the nominal interest rate is 3% across a year with monthly compounding.

EIR = (1 + (3/12) )^{12} - 1

EIR = 3.04\%