The interest rate that you pay on your loan determines how much of your monthly payment goes toward paying interest charges and how much goes toward paying down the amount you owe. Especially on larger loans, knowing the interest rate that you are paying is important, because you may be able to get a better interest rate by refinancing your loan. In order to calculate the interest rate on your loan, you need to know the outstanding balance and the amount of interest that was charged.
Instructions
1. Determine the outstanding balance of your loan from your last loan statement. For example, you may still owe $194,000 on your mortgage.
2. Determine the amount of interest that accrued on the balance of your loan from your most recent loan statement. For example, you might have paid $1,479.25 in interest.
3. Divide the amount of interest accrued by the balance of the loan to find the periodic interest rate. For example, you would divide 1,479.25 by 194,000 to find the periodic interest rate equals 0.007625.
4. Multiply the periodic rate from step three by 100 to covert the interest rate to a percentage. For example, the rate in step three would be 0.7625 percent per period.
5. Multiply the periodic rate expressed as a percentage by the number of periods per year to calculate the annual percentage rate. For example, if you made monthly payments on the loan, you would multiply 0.7625 by 12 to find the annual interest rate equals 9.15 percent.
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