Q:
How do you convert APR to a monthly interest rate?
A:
Quick Answer
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.
Continue Reading
Credit:
Tetra Images - Jamie Grill
Brand X Pictures
Getty Images
Full Answer
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.
Learn more about Financial CalculationsSources:
Related Questions
-
Q:
What is a simple explanation of APR interest?
A: APR, or annual percentage rate, calculates the percentage of the principal cost someone pays over one year, taking into account all charges, according to I... Full Answer >Filed Under: -
Q:
What is the average interest rate on an auto loan from Bank of America?
A: The annual percentage rate on an approved auto loan from Bank of America varies depending on several factors such as the borrower's credit history and appr... Full Answer >Filed Under: -
Q:
Are there legitimate credit cards that offer 0 percent APR?
A: There are credit cards that have an annual percentage rate, or APR, of 0 percent, but this rate is only in effect for a limited period of time and goes up ... Full Answer >Filed Under: -
Q:
What is the difference between mortgage APR vs. rate?
A: The advertised or nominal interest rate on a mortgage is used to calculate the interest incurred on the amount of the loan, and the annual percentage rate ... Full Answer >Filed Under:
