Convert Interest per Year and Month

A simple calculator for the annual and monthly interest loan. Enter one value, the other will be calculated.

Example 4 percent interest per year is like 0.327 interest per month.

Interest per year: %

Interest per month: %

The interest loan per month is slightly less than one twelfth of the interest loan per year, the exact factor is 12.68250301 for the annual interest rate compared to the monthly interest rate, or its inverse 0.08295381 for the opposite case. The exact formula for the monthly interest is 100 * ( ¹²√ 1 + annual percentage / 100 - 1), for the annual interest the formula is 100 * [ ( 1 + monthly percentage / 100 )¹² - 1 ].

Converting monthly interest to annual interest involves repeated interest calculations, also known as compound interest, even though these usually refer to years. This is an exponential calculation, which people are notoriously bad at estimating. The growth is slow at first and then accelerates. This is because you add something to an initial value, then to the new value, which is already larger than the previous one, and thus the added amounts reinforce each other. If you look at the formulas above, it becomes clear that calculating them mentally is extremely difficult.

Generally, the annual interest rate is given, but often the monthly interest rate is used for calculations. People are accustomed to the annual interest rate and can better understand it. Monthly interest on an investment is often perceived as more convenient; people are simply happy to receive extra money. It doesn't matter for the year-end result if the calculations are made using the above formula. However, it can also happen that both options are offered and do not produce the same results. Sometimes you can get slightly better terms with an annual interest rate, as the cost to the bank is lower. This should be checked individually.