How Do You Convert APR to a Monthly Interest Rate?
Last Updated Mar 25, 2020 12:59:11 AM ET
To convert APR to a monthly interest rate, divide the total APR percentage by 12, according to Mark Kennan. As Investopedia explains, APR is the annual percentage rate on a loan and does not take into account compounding interest.
According to Investopedia, APR differs from annual percentage yield (APY) in that APY does include compound interest. Compound interest is additional interest that is added to the existing interest. The monthly interest rate is slightly higher if it is calculated based on the APY because of this additional compounding interest. Banks sometimes present the annual interest rate as APY instead of the APR to make rates seem lower than they are.
More From Reference
Tips and Tricks for Making Driveway Snow Removal Easier
Here’s How Online Games Like Prodigy Are Revolutionizing Education
What Are the Steps of Presidential Impeachment?
What Does George Soros' Open Society Foundations Network Fund?
The History of the United States' Golden Presidential Dollars
How the COVID-19 Pandemic Has Changed Schools and Education in Lasting Ways