You are correct in understanding my question. That has been the way I have been currently using your calculator, the trial and error method to find my interest rate. I was hoping there would be a fomula to be able to use in excel to just calculate the interest rate for simple ease of use but I had a feeling there wasn’t. Thanks for your help and especially for the quick response.

JAL

One cannot get at the interest rate directly, as far as I know. In other words, there is no formula that can give you the rate.

The way around this is to approach the interest rate iteratively. First, you take a guess at the rate, plug it into a formula, and see how far off the evaluation of the formula is, and make a refined guess for the next iteration. You can keep doing this until you’re arbitrarily close to “real” interest rate.

For example, since you already know your payment, you guess a value for the interest rate. Plug the rate (and the other numbers) into the formula, and see what the payment for that rate should be. If the payment you calculated is too high, then you should revise your interest rate guess lower. If the payment you calculate is too low, you should revise your interest rate higher. Keep narrowing in on the rate until the difference between the payment you calculate and the actual payment is very small (i.e., tiny fractions of a penny).

My calculator already does this for you. Plug in all the other numbers and leave the rate blank. The calculator will give you the rate which matches that payment (provided the payment reflects a loan scenario that is really amortizable).

Have I misunderstood your question?

Bret

I have as well passed your calculator around throughout my Bank. It is one of the best sites that matches are banks amortization schedule. Your site is easier to use. The question that I have for you and maybe a little brain teaser is, I am trying to develop a equation that I can use in excel to achieve what my interest rate would be if I know my payment already. For instance, if you are a little confused, I am developing a sensitivity sheet that will tell me what interest rate will cause my loan to breakeven (1.00x) or 1.20x or others. I have tried to take the payment function and get the interest rate all by itself, but I can’t get there. I also cannot find the inverse to the payment function online either. I thought I would ask you since you seem to have developed a very nice site. Let me know what you think. If you need more information on what I am trying to do, let me know. Or, even if you can point me in the right direction too, that would help as well. Thanks.

JAL

(And thanks for the kudos, MKF!)

Bret

Just to let you know…I have been in the mortgage business for the past 8 years. I have passed out your web link like Busch light at a NASCAR race.Your am calculator is the best on the web hands down…keep up the good work

mkf