How to Calculate Interest Rates

By Andrea Griffith
Figure out your interest rate quickly and easily.

A list of things that make many people cringe might include interest rates and math. Whether you're learning about interest rates in math class or you're trying to determine an interest rate for yourself, as long as you have the formula calculating interest is easy. You must know the variables: interest rate, principle and time.

Finding Interest

Know and understand the formula for finding interest:

P = principle, R = rate, T = time (normally in years) and I = Interest.

P (principal) x R (rate) x T (time) = I (interest)

Let's say you purchased a car for $18,670 (principal) with a six-year loan at an interest rate of 3.7 percent.

Set up the equation. I = P x R x T

Plug in your variables:

I = 18,670 x 3.7 x 6

Convert your the interest to a decimal figure: 3.7 percent = 0.037.

I = 18,670 x 0.037 x 6

18,670 x 0.037 = 690.79

Multiply 690.79 by 6 to finish the equation.

690.79 x 6 = 4,144.74

The interest will be $4,144.74.

Finding Interest Percent Rate

Know the equation to find the percent: R = I / PT.

The task is to determine what annual interest rate is needed for $3,120 to earn $150 in 18 months.

Plug in your numbers to begin solving:

R = 150 / (3,120)(18/12)

The second parenthetical factor represents the number of payments divided by the number of months in a year.

R = 150 / 3,120 x 1.5

R = 150 / 4,680

Divide 150 by 4,680 to solve.

R = 150 / 4,680

Now solve:

R = 0.032

R = 3.2 percent

The interest rate will be 3.2 percent.

About the Author

Andrea Griffith has been writing professionally since 2005. Her work has been published by the "Western Herald," Detroit WDIV, USAToday and other print, broadcast and online publications. Although she writes about a wide range of topics, her areas of expertise include fashion, beauty, technology and education. She holds a Bachelor of Arts in journalism and English from Western Michigan University.