How to Find the Monthly Interest Rate on a Payment

Most loans, including consumer lines of credit, require consumers to pay a specified interest rate or annual percentage rate on the amount of money that they borrow. An annual percentage rate is the amount of interest that is applied to the principal loan amount over the course of one year. However, lenders do not send consumers a separate bill for accrued interest at the end of the year; rather, the usual method is to incorporate interest payments in with monthly principal payments. Consumers can determine the amount of their payment that goes towards interest with a few basic calculations.

Instructions

1

Determine the principal amount of your loan or credit card balance and the annual percentage rate or interest that is charged on your loan or credit card. This information can be found by viewing your current loan or credit card statement. If you cannot locate the information this way, you can call your credit card company or lending institution for updated information on your balance and credit terms.

2

Multiply your loan or credit principal (the amount that you currently owe) by the annual percentage rate. The product of this equation will tell you how much interest you will end up paying on the loan over the course of one year if the loan principal does not increase by additional credit card use. For example, if your loan principal is $1,000 and your annual percentage rate is 10 percent, you will be charged $100 in interest over the course of one year.

3

Divide the amount of interest that you will accrue in one year on your loan or credit principal by 12. Since there are 12 months in one year, the quotient of this equation will tell you how much of the annual interest charged is allocated to each monthly payment. For example, if you were to pay $100 each year in interest, your monthly interest payment would be $8.33 (100/12=8.33).