How this calculation works
Recover the implied reducing-balance rate when principal, equal payment amount and number of payments are known. Frequency matters: the same periodic cash flow implies different annual rates when paid monthly or quarterly. This tool separates nominal annualisation from effective annual compounding. Use APR instead when fees reduce the amount actually received.
Worked example
This example uses illustrative inputs. Your current result is shown above.
If ₹10,000 is repaid by one payment of ₹10,100 after one monthly period, r = ₹10,100 ÷ ₹10,000 − 1 = 1%. Enter principal 10,000, payment 10,100, one payment and 12 payments per year. Nominal annual rate is 12%; the effective annual rate is 12.6825%.
Assumptions and limits
- All payments are equal and occur at the end of equally spaced periods. There is no balloon, upfront instalment or irregular payment date.
- The solver supports non-negative rates. Fees, insurance and withheld proceeds are excluded unless you intentionally adjust the cash-flow principal.
Questions people ask
Why are nominal and effective annual rates different?
Nominal annualisation multiplies the periodic rate by the frequency. Effective annualisation also includes compounding across the year.
Can this infer a flat interest quote?
It finds the reducing-balance rate implied by the cash flows. That can help compare costs, but it does not recreate a lender’s quoted flat-rate convention.