Interest Rate Calculator

The rate tells you what borrowing or lending costs as a percentage per year. Borrow $1,000 at 10% for a year with simple interest, and you'd owe $100 of interest. On a savings account paying 4%, $1,000 earns about $40. Rates are usually quoted yearly, but interest may be charged or paid daily or monthly, so the actual timing affects the final total.

If you know the interest and the amount, divide the interest by the principal and then by the time in years. If you paid $600 of interest on $5,000 over 2 years, the simple rate is 600 / 5,000 / 2 = 6%. For loans with monthly payments, the math is harder because the balance keeps changing, so use a loan or spreadsheet function such as RATE.

It depends on the product and current market conditions. A good rate is lower than what similar borrowers are offered today, or higher than other similar savings accounts. Check several lenders on the same day, because rates move. For specifics, see our pages on auto loans, mortgages, personal loans and credit cards.

The interest rate is the stated yearly rate. APY, the annual percentage yield, includes the effect of compounding, so it shows what you actually earn in a year. A 5% rate compounded monthly is an APY of 5.12%. If interest compounds only once a year, the two match. Use APY to compare savings accounts and CDs.

The interest rate is the cost of borrowing the principal alone. APR adds most lender fees, such as origination fees and points, and spreads them across the loan term, expressed as a yearly rate. A loan with a low rate and high fees can have a higher APR than a loan with a slightly higher rate and no fees. Learn more on our APR calculator page.

The Fed sets a target range for the federal funds rate, the overnight rate banks charge one another. It doesn't directly set your mortgage or car loan rate. But that target influences the prime rate, which many credit cards and lines of credit follow closely. Fixed mortgage rates track longer-term bond yields more than the Fed's rate, so they don't always move together.

Higher rates make borrowing more expensive, which tends to slow spending and investment and can ease price growth over time. Lower rates do the opposite. Central banks use this link to try to keep inflation near their target. The effect takes time, often many months, and other forces such as energy prices and supply shortages can also move inflation.

Higher rates can weigh on stocks by raising companies' borrowing costs and making bonds and savings accounts more attractive by comparison. They also reduce today's value of future profits, which tends to hit fast-growing companies hardest. But the relationship isn't reliable. Stocks can rise along with rates if the economy and earnings are strong, so don't treat rates as a simple market signal.

Bond prices and rates move in opposite directions. When rates rise, new bonds pay more, so existing bonds with lower payments lose value. When rates fall, existing bonds become more attractive. Longer-term bonds react more strongly. If you hold a bond until it matures and the issuer pays, you still get the promised payments, whatever its price did along the way.

Each month, the lender charges interest on your remaining balance, and the rest of your payment reduces the principal. Interest is highest at the start, when the balance is largest, and falls over time. On a fixed-rate loan, the payment itself doesn't change. Use our loan amortization calculator to see each month's split for your own loan.

It's the risk that a change in rates hurts you. If you hold long-term bonds, rising rates can reduce their market value. If you have a variable-rate loan, rising rates can raise your payment. And if you lock in a low savings rate, you might miss out when rates rise. Matching the length of your investments to when you'll need the money can reduce it.