# How to Calculate APR on Installment Loans

Figure your APR on an installment loan.

If you have taken out a loan and are paying it back in installments, you can calculate the annual percentage rate, or APR, based on the interest you are paying each month. In most cases, with an installment loan you pay the same amount each month over the course of the loan. But the amount that goes to interest slowly goes down and the amount that goes to the principal goes up. The APR you figure using this method will be an average APR over the life of the loan.

## Step 1

Multiply your monthly payment by the number of months in the term of the loan. For example, if you have a five-year loan and pay \$300 per month, the total is \$18,000.

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## Step 2

Subtract the principal, the amount you originally received for the loan, from the total from Step 1 to get the total interest you will pay. For instance, if you received \$12,000 and will pay a total of \$18,000 over the term of the loan, you will pay \$6,000 in interest.

## Step 3

Divide the total interest from Step 2 by the number of years on the loan. In this example, it will equal \$1,200.