1. What is the Motor Loan Interest Rate Formula?

The motor loan interest rate formula calculates the implied interest rate based on your monthly payment (EMI), loan amount, and loan term. It helps you understand the true cost of your vehicle loan.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( r \) — Monthly interest rate (decimal)
• \( EMI \) — Equated Monthly Installment ($)
• \( P \) — Loan principal amount ($)
• \( n \) — Loan term in months

Explanation: The equation is solved iteratively to find the interest rate that balances both sides of the equation.

3. Importance of Interest Rate Calculation

Details: Knowing the effective interest rate helps you compare loan offers, understand the true cost of financing, and make informed decisions about vehicle purchases.

4. Using the Calculator

Tips: Enter your monthly payment amount, total loan amount, and loan term in months. The calculator will display both the monthly and annual interest rates.

5. Frequently Asked Questions (FAQ)

Q1: Why is my calculated rate different from the advertised rate?
A: Advertised rates often don't include fees and other charges. This calculator shows the effective rate based on your actual payments.

Q2: What's a good interest rate for a motor loan?
A: Rates vary by credit score and market conditions, but generally under 5% is excellent, 5-8% is good, and above 8% is expensive.

Q3: Does this work for other types of loans?
A: Yes, this formula works for any fixed-rate installment loan (personal loans, home loans, etc.).

Q4: Why does the calculator need to iterate?
A: The interest rate appears on both sides of the equation, so we use numerical methods to find the exact rate.

Q5: How accurate is this calculation?
A: Very accurate when you input correct EMI, principal, and term values. Small differences may occur due to rounding in actual loan calculations.