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What is an interest rate calculator and how to use it in 2022 in the Philippines

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An interest rate is the amount of interest payable per period as a percentage of the principal sum on an amount lent, deposited, or borrowed. The total interest on an amount lent, deposited, or borrowed is determined by the original principal amount, the interest rate, the compounding frequency, and the period over which it is deposited or borrowed.

The annual interest rate is the rate over one year; other interest rates may apply over shorter periods, such as a month or a day, but are usually annualized. The annual interest rate has been described as an "index of preference." For every peso of present income, replace one peso of future income. The borrower wants or needs to have the money sooner rather than later and is willing to pay an interest rate fee for this privilege.

Simple interest is calculated using the simple interest calculator as an annual percentage rate of the principal only. In contrast, compound interest is calculated as the annual percentage yield of the principal with any accrued interest. Due to this compounding behavior, interest paid by lenders eventually earns interest, and the more often interest compounds in a given time, the more interest is earned. The annual interest rate represents compound interest rather than simple interest unless otherwise noted. To conduct calculations or learn more about the differences in compounding frequencies, use the compound interest calculator.

The interest rate calculator can determine real interest rates on loans with fixed terms and monthly payments, such as when car dealers only provide monthly payment information and the total price but do not include the actual interest rate on the car loan. Instead, use the simple interest calculator or the compound interest calculator to calculate the interest on investments to compare the difference between interest rates (higher interest rates and lower interest rates).

It is a free tool that calculates the interest rate, the future value of loans or savings, the number of payments, and the total interest paid or received. You can only calculate the interest rate every year, which means if your loan is not yearly, you have to convert it to yearly by dividing it by 12 months if it is given in months or by 365 days if it is given in days.

It has a box in which you enter the principal, which is the loan amount, the loan term, in years, and then the monthly payment amount, and the calculator will give you a knowledge of the interest rate, the number of payments, the amount paid and the total interest paid. Simple-interest online calculators are easy to use. To calculate the interest rate, enter the following information:

The loan amount, i.e. the amount invested or borrowed

The loan term in years.

The payment you will be making or you are making monthly.

After you enter this data and press the **Calculate **button, the interest rate calculator will utilize the formula to determine the interest rate, the total payments, and the total income values in seconds. You will receive the exact interest rate you receive/pay during the loan term.

The interest rate is the annual percentage yield of the principal amount that the lender or bank charges the borrower to use its assets or money for a particular time. The interest rate is the rate a bank charges its depositors for keeping money in a savings account, a recurring deposit (compound interest rate), or a fixed deposit (simple interest rate). In this section, we will discuss the interest rate formula.

The interest rate formula can calculate the amount of money that must be repaid for a loan and the interest over a fixed deposit, mutual fund, etc. The interest rate formula can also be used to calculate credit card interest.

The interest rate of a particular amount on simple interest can be calculated using the simple interest calculator, which will then use the following formula: interest rate = (simple interest × 100) / (P × t)

The interest rate of a particular amount of compound interest can be calculated using the following formula: compound interest rate = P (1+i)^t – P

**Where**:

P = principal amount or the current value

i = r = rate of interest

t = time period

**Example**: Mr. A borrowed ₱6,000 from the bank at some rate per annum and that amount becomes double in two years. Calculate the rate at which Mr. A borrowed the money. First of all, input the given digits into specific places on the calculator:

Principal amount / current value = ₱6,000 (given amount)

Simple interest = ₱12,000 - ₱6,000 (since it was doubled after two years) = ₱6,000

Time = two years; now, click on

**Calculate**, and the calculator will now use the interest rate formula;Interest rate = (simple interest × 100) / (P × t)

Interest rate = (6,000 × 100) / (6,000 × 2) = 600000 / 12000 = 600 / 12 = 50

Interest rate = 50%

Therefore, Mr. A borrowed the money at a 50% rate.

**Example**: Mrs. B. pays a fixed price of ₱10,000 into her bank account every month. The bank promises her compound interest of ₱100 per payment, and she is going to make this payment for 10 years. Let's calculate her compound interest rate. First of all, type in the inputs into the given spaces:

Amount paid = ₱10,000 x 10 x 12 (payment per month x number of number of years paid × number of months in a year) = ₱1,200,000.

Compounded interest = ₱100 x 10 x 12 (compounded interest per month x number of years x number of months a year) = ₱12,000

Time = 10 years; now, click on

**Calculate**. The calculator will now use the compound interest rate formula; compound interest rate = P (1+i)^t – PCompound interest rate = 1200000 (1 + 12000)^10 - 1200000 = 1200000 (12001)^10 - 1200000 = 1.07%

Therefore, Mrs. B's compound interest rate is 1.07.

The online calculator instantly shows you the interest rate you will have to pay or receive after the loan term, i.e. the total amount you will pay, the total interest, and the interest rate. But to get this interest rate, you must first enter basic information like principal amount, time, and the monthly payment in the tool. The interest rate calculator is used in the following cases:

You want to calculate the annual interest rate you will pay if you get a loan.

You are the granter, and you can use the tool to calculate the total interest earned, the number of times the interest will be paid, and the interest rate easily.

If you had put in some cash in saving fd, ppf, ssy, rd, or any other savings rate scheme, you could use it to calculate the interest rate.

It could be used to estimate how much the loan will cost.

An interest rate calculator is an online tool that makes a quick and easy interest rate and total loan future amount calculation. Unlike manual calculators, this tool can instantly display the results of complex numbers without wasting time. The following points explain how the tool can help you:

The tool will display the total interest that will be earned.

It can immediately give a computed future loan amount, even for longer terms or periods, where people would often commit calculation errors or make mistakes.

Unlike the manual calculation method, the tool shows the exact amount without wasting time.

It gives an insight into the loan you want to get and enables you to do financial planning.

It enables us to calculate the total cost of what we will receive on the loan maturity.

It is a free tool and can be accessed 24/7.

As stated earlier, there are two interest rate calculators: the compound interest rate calculator and the simple interest calculator. The online tool only has one type out of these, i.e. the compound interest rate calculator, which can do the job of the two.

The online tool helps borrowers and lenders make good financial decisions because it provides several useful features. Some of the benefits of using it are:

**Offers error-free results**.**Offers support for multiple currencies**. The tool can compute interest rates and total loan amount regardless of the currency. It works well for any currency, including the dollar, euro, pounds, peso, etc., and calculates values per these currencies with no credit report.**Offers better speed**. The online tool provides a very quick picture of the interest rate and total amount you will probably have while you borrow or lend cash or even deposit it. The tool can also be used to check the overall comparison between various borrowing options, aiding decision-making on which loan to take. It provides good detailing, including interest rates, the total amount to be paid, the total number of payments, and total interest.**Helps in consolidating or refinancing your debt.**You can compare your current loan interest rates (i.e., which one has the lower interest rate and which has a higher interest rate) to the new loan offers and determine whether you can save enough to make the switch or jump.

The calculator does not come with any special features or functions; you need to input the values correctly, and then the tool will do the hard work of getting the problem solved in seconds. Some of the functions you may likely see while using the calculator are:

A = total accrued amount ( i.e, principal + interest), or future value

P = the principal amount

I = the interest amount.

r = interest rates

t = the time in years

Some of the other functions we could see while using the tool are:

**Compounding frequency**. The compounding frequency is the number of times the accrued interest is credited to the account regularly (or not at all until maturity), which could be a year, a half-year, a month, a week, or every day or repeatedly.**Principle**. The principal amount, also known as the amount taken, is the amount that is initially lent to a bank or the entire amount that is infused. It is always denoted by P.**Rate**. The rate is the essence of the calculator; it is the rate of interest at which the principal amount is given to a borrower for certain periods. The interest rate can be 50%, 2.5%, 18%, etc.**Compound interest**. Compounding interest is the interest a lender earns on an already interest. For example, someone has ₱1,000 and earns 10% interest each year; the compounding interest will be ₱1100 at the end of the first year. At the end of the second year, the compounding interest will be ₱1,210.**Accrued amount**. This refers to the accumulation of interest, income, or expenses over time, often referred to as an individual or a business. For instance, interest in a savings account accumulates over time, so its total value increases.**Accrued interest**. This is the interest accumulated at a certain date but not yet repaid on a loan or other financial obligation.

The keyboard on the computer is very straightforward to input data for this program as everything is essentially digits, and there are no special keys.

We can use the tool to determine the interest rate, r, and when we have gotten this value, we can now compute the final investment value using the specific calculator that will now use the formula: A = P (1 + rt). In this formula, P is the total sum that is going to be invested at an interest rate (r) per annum (annual rate) for a fixed loan term (t).

When the interest rate is in decimal form; r = R/100; r and t should be in the same units of time, we now have A = P + I = P + (P x r x t), and finally; A = P (1 + rt).

If we want to compute the total sum accrued in the loan periods or the future value, we can use a specific calculator which uses the formula A = P (1 + rt). If we want to compute the principal amount of a loan, the tool uses P = A / (1 + rt). When we are looking for the interest rate in decimal, it uses r = (1/t)(A/P - 1)

When we are to compute the interest rates in percentage, it uses R = r x 100. If we are finding time, it uses t = (1/r)(A/P - 1)

**Example 1**: Someone is about to purchase a car worth ₱280,000. He wants to borrow the money from the financial institution, but he is unaware of the interest rate per annum, he is planning to go for 4 years, but the bank tells him his total monthly payment will be ₱7,200. What will be the interest rate for this transaction?

First of all, you input the above data correctly on the calculator;

The amount borrowed or principal, P = ₱280,000

Rate of interest, r =?

Time or term, t = 4 years, and then press

**Calculate**; the output will be as follows:Interest rates = 10.729%

Total of 48 monthly payments = ₱345,600.00

Total interest paid = ₱65,600.00

So, his interest rate will be 10.729%

**Example 2**: If someone borrows a sum of ₱460,500 for a term of 21 months at an ungiven rate per annum with a simple interest of ₱161,175, what will be their interest rates?

Firstly, as usual, we input the given data into the calculator;

Principal, P = ₱460,500

Time or term, t = 21/12 years

Interest rates, r =?

Simple interest = ₱161,175, then click on

**Calculate**; the tool will now use the interest rate formula;

Interest rates = (simple interest × 100) / (P × t)

r = (161175 x 100) / (460500 x 21/12)

r = (16117500) / (460500 x 1.75)

r = (16117500) / (805,875)

r = 20%

The interest rate is 20%.

The tool is not just useful for borrowers or lenders; interest rate is a concise topic in schools, so it might be utilized by both students and lecturers, who look to do their work quickly or try to confirm their manual calculations. In a classroom context, complex questions on the topic are often asked, and the tool can also answer them. Some calculators provide step-by-step solutions, while others solve and tell you how much you pay back on your mortgage each year, month, and even daily. Let's see an **example**;

A man gets a loan of ₱30,000 from a bank, with a fixed monthly payment of ₱1,000 for a loan term of 3 years on an unknown interest rate. Compute the total amount accrued after 1 year, 2 years, and 3 years using the simple interest calculator.

Before using the simple interest calculator to determine the values required, you have first to use the interest rate calculator to determine the interest rate because it is only then you can compute the total simple interest using the simple interest calculator.

Now, we are going to compute the interest rate for the 3 years, so firstly, we input our given data on the interest rate calculator;

Loan amount = ₱30,000

Loan term = 3 years

Monthly payment = ₱1,000; now we click on

**Calculate**, which will now give us the following output;Interest rate = 12.249%

Total of 36 monthly payments = ₱36,000.00

Total interest paid = ₱6,000.00

Since we have gotten our interest rate, let's use this data to compute how much the person in question will pay for year 1, year 2, and year 3 using a simple interest calculator.

**After 1 year**:

**A =**₱**33,674.70**I = A - P = ₱3,674.70

**Equation**:

A = P(1 + rt)

**Calculation**:

First, converting R percent to r a decimal

r = R/100 = 12.249%/100 = 0.12249 per year.

**Solving**:

A = 30000 [ 1 + (0.12249 × 1)] = 33674.7

A = ₱33,674.70

The total amount, principal plus interest, from simple interest on a principal of ₱30,000.00 at a rate of 12.249% per year for 1 year is ₱33,674.70 using the simple interest calculator.

**After year 2**:

**A =**₱**37,349.40**I = A - P = ₱7,349.40

**Equation**:

A = P(1 + rt)

**Calculation**:

First, converting R percent to r a decimal

r = R/100 = 12.249%/100 = 0.12249 per year.

**Solving**:

A = 30000 [ 1 + (0.12249 × 2)] = 37349.4

A = ₱37,349.40

The total amount, principal plus interest, from simple interest on a principal of ₱30,000.00 at a rate of 12.249% per year for 2 years is ₱37,349.40 using the simple interest calculator.

**After year 3**:**A =**₱**41,024.10**I = A - P = ₱11,024.10

**Equation**:

A = P(1 + rt)

**Calculation**:

First, converting R percent to r a decimal

r = R/100 = 12.249%/100 = 0.12249 per year.

**Solving our equation**:

A = 30000 [1 + (0.12249 × 3)] = 41024.1

A = ₱41,024.10

The total amount, principal plus interest, from simple interest on a principal of ₱30,000.00 at a rate of 12.249% per year for 3 years is $41,024.10 using the simple interest calculator.

Therefore, in complex situations like this, you can use a simple interest calculator or a compound interest calculator.