How to Calculate APR Based on Interest Payments

The APR, or annual percentage rate, calculates the annual interest rate by multiplying the periodic interest rate by the number of payments per year. When you make interest payments on a loan, you can calculate the periodic rate based on the amount of interest paid and amounts owed. Finding the APR can help you compare how the interest rates of different loans with different payment periods compare.

Instructions

1

Divide the interest paid by the principal owed on the loan to find the periodic interest rate for the loan. For example, if $64.80 in interest is paid on $7,200, divide $64.80 by $7,200 to get 0.009.

2

Multiply the periodic interest rate by the number of payments per year to find the APR expressed as a decimal. In this example, if payments are made on a monthly basis, multiply 0.009 by 12 to get 0.108.

3

Multiply the APR as a decimal by 100 to find the APR as a percentage. Concluding this example, multiply 100 by 0.108 to get 10.8 percent.