If you have credit cards or if you have a bank loan for your home, it is possible that you pay interest (or finance charge) on that amount by a specific percentage throughout the year. This is called the annual interest rate. Calculate the annual percentage rate on your credit card only takes a few minutes if you know the key parameters and a little algebra. However, the annual rate on mortgage loans differs from simple interest because of the charges or additional fees you have to pay to secure your loan. You can learn to compute both in this article.
25 ÷ 2,500 = 0.01
Understanding the annual interest rate.
1. You have to understand that borrowing money costs money. If you are using a credit card or if your doing a loan for a home, you will probably need to use more money than you did at the time of purchase. If they give you a loan, lenders will expect you that you repay the loan amount, plus a finance charge for the luxury of seeing you lend money. It is this financial burden that the annual interest rate is known.
2. You should know that the annual rate can be divided into payments monthly or annual interest. This is the rate you pay on your credit or your loans. For example, if you made a loan of 1000 euros (or dollars) and your annual rate of 10% at the end of the year you will have 100 euros (or dollars), or 10% of your 1000 euros (or dollars) loan.
Lenders can adjust this number and charge your interest monthly. For the monthly rate, you just divide your annual rate by 12 to 10% ÷ 12 = 0.83%. Each month, your interest rate will be 0.83%.
Lenders may also change the rate for daily rates. If you want to know the daily rate, divide your annual rate by 365 365 ÷ 10% = 0.02%. Every day, your interest rate will be 0.02%.
Lenders can adjust this number and charge your interest monthly. For the monthly rate, you just divide your annual rate by 12 to 10% ÷ 12 = 0.83%. Each month, your interest rate will be 0.83%.
Lenders may also change the rate for daily rates. If you want to know the daily rate, divide your annual rate by 365 365 ÷ 10% = 0.02%. Every day, your interest rate will be 0.02%.
3. Be aware that the interest rate is about 14%. This is not an insignificant amount, especially if you are not able to pay promptly the amount of the loan. Average fixed rates are slightly below 14%, while the average variable rates are slightly above 14%.
4. Know that you will not have to pay any interest if you pay your credit card spending. If you spend 500 euros (or dollars) via your credit card, but your account balance is the day the money is debited, no rate will be calculated on the sum. To avoid paying interest, set your monthly payments on time and in full.
Calculate the annual interest rate for credit cards.
1. Find the current balance or the amount taken from your credit card using your current statement. Let's say your current balance, with the annual rate is 2500 dollars (or euros).
2. Find the finance charge your card with your most recent statement. Your statement indicates that your hypothetical credit finance charge is 25 dollars (or euros).
3. Divide your financial burden by the amount you owe.
25 ÷ 2,500 = 0.01
4. Multiply the result by 100 to get a percentage. You then get your financial burden or monthly interest rate.
0.01 x 100 = 1%
0.01 x 100 = 1%
5. Multiply the monthly charge by 12 The result is your annual interest rate (percent).
1 x 12% = 12%
1 x 12% = 12%
Calculate the annual interest rate for mortgages.
1. Find a calculator of annual interest rates online. Type "mortgage calculator annual interest rate" in the search bar and click on a result page.
2. Determine the amount you intend to borrow and enter the amount where this is indicated in the calculator. Let's say you're planning to borrow 300,000 dollars (or euros).
3. Enter the additional costs to secure the loan (fees) where indicated on the computer. Let these additional costs amount to 750 dollars (or euros).
4. Enter the given interest rate, which is the interest rate per year without additional fees. For example, calculate interest by taking a 6.25% rate.
5. Enter the life of the loan. Most - but not all - of the loans are based on a fixed term of 30 years.
6. Click on the "Calculate" button to get the annual interest rate, which will be different from the rate of interest and represent the real cost of the loan based on the total amount borrowed.
- The annual interest rate on your loan would be hypothetical 6.37%.
- This sum of the amount of the loan plus interest would amount to 1847 dollars (or euros).
- The total cost of interest on the annual interest rate would rise to 364,975 dollars (or euros), which would bring the total cost of the loan at 664,920 dollars (or euros).
Post a Comment