Convert a monthly interest rate into a nominal annual rate.
Simple multiplication — this is the nominal rate, not compounded.
Annual rate: Monthly rate × 12
The annual interest rate calculator turns a monthly rate into its nominal annual equivalent by multiplying by 12. You enter a rate quoted per month, and it returns the rate per year in the form banks use when they advertise loans and deposits.
In India, many informal and short-term lenders quote interest per month. A moneylender may say '2 rupees per hundred', meaning 2% a month. Chit funds, pawn brokers, some gold loan schemes, credit cards and lending apps also quote monthly figures. A monthly number looks small, and people often fail to see that 2% a month is 24% a year. This calculator makes that conversion instantly so you can compare such offers with bank rates.
It gives the nominal rate, which ignores compounding. For the true yearly cost including compounding, use the effective interest rate calculator.
1. Note the rate quoted per month, for example 1.5%.
2. Multiply by 12: nominal annual rate = monthly rate × 12.
3. For the effective annual rate, write the monthly rate as a decimal m and compute (1 + m)¹² − 1.
4. Multiply by 100 to express the effective rate as a percentage.
5. Compare the nominal figure with bank loan rates, and the effective figure when interest is added to the balance each month.
A nominal annual rate is simply the per-period rate scaled up to a year, ignoring the effect of interest earning interest. If a lender charges 1.5% of the balance each month, that is 12 × 1.5 = 18% of the balance over a year, provided the interest is paid off monthly and never added to the principal. This is the convention used in loan agreements: a home loan quoted at 9% a year charges 0.75% a month. The conversion is exact for this nominal meaning, and it is reversible by dividing by 12.
If monthly interest is not paid and is added to the amount owed, next month's interest is charged on that larger sum. Then the true yearly cost is (1 + m)¹² − 1, which is higher than 12m. At 1.5% a month, the nominal rate is 18%, while the effective rate is about 19.56%. At 3% a month, common on unpaid credit card balances, the nominal rate is 36% and the effective rate is about 42.6%. The gap widens as the monthly rate rises.
Traditional quotes like 'one rupee per hundred per month' mean 1% a month, or 12% a year nominal. 'Two rupees' is 24% and 'three rupees' is 36%. Some lenders also quote per day or per week. The same logic applies: multiply by the number of periods in a year for the nominal rate, and compound for the effective rate. Seeing the annual figure next to a bank's rate often shows how expensive informal credit is.
A local lender offers Ravi a short-term loan at 1.5% interest per month, and he wants to compare it with a bank personal loan quoted per year.
Answer: Nominal annual rate 18%
Treating a monthly rate as if it were an annual rate because it looks small.
Calling the result the effective rate; multiplying by 12 ignores compounding.
Forgetting that unpaid monthly interest is often added to principal, raising the real cost.
Mixing up a flat monthly rate on the original amount with a monthly rate on the reducing balance.
Comparing moneylender, chit fund or pawn broker rates with bank loans.
Converting a credit card's monthly finance charge into an annual figure.
Checking a lending app's quoted monthly rate.
Solving textbook problems that give interest per month.
Is this the same as the effective annual rate?
No. This is the simple stated rate. The effective rate also includes compounding, and is always a little higher. Use the Effective Interest Rate calculator for that.