We often pay interest on a loan or earn interest on a saving account. This article will show you some simple processes to calculate the **Monthly Interest Rate **in Excel.

To illustrate, Iâ€™m going to use a sample dataset as an example. The below dataset represents the monthly payment amount to pay for a loan amount in a certain number of periods.

**Table of Contents**hide

## What is the Monthly Interest Rate?

In brief, the amount that is charged monthly on top of the principal by a lender to a borrower is called **Monthly Interest Rate**. Moreover, the interest rate is also applicable to the amount earned at a bank from a savings account.

## How to Calculate Monthly Interest Rate in Excel: 3 Simple Methods

### 1. Use Excel RATE Function to Calculate Monthly Interest Rate

Excel provides various **Functions**, **Features**, etc. to perform many operations. Here, in our first method, weâ€™ll use the Excel **RATE** function to compute the **Monthly Interest Rate**. The **RATE** function is used to return the interest rate per period of a loan or an investment.

#### 1.1 Interest Rate on a Loan

We usually pay our installment loans monthly. So, itâ€™s useful for us to know the monthly interest rate. First, weâ€™ll show how to calculate the monthly interest rate on a loan.

**STEPS:**

- In the beginning, select cell
**D8**and type the formula:

`=RATE(D5,-D6,D7)`

**NOTE:** Here, the **Minus **sign before **D6 **indicates the outgoing cash.

- Next, press
**Enter**. Subsequently, itâ€™ll return the result.

#### 1.2 Interest Rate on a Saving Account

Additionally, we can also calculate the monthly interest rate on a **Savings Account**. A lot of times, we monthly save a certain portion of our earnings in a bank account and we fix a definite amount to reach. The interest rate is also present there and in this case, we donâ€™t have present value but we do have a future value. In order to compute the interest rate on a savings account, follow the steps below.

**STEPS:**

- First, select cell
**D8**and type the formula:

`=RATE(D5,-D6,0,D7)`

**NOTE:** Here, the **Minus **sign before **D6 **indicates the outgoing cash and, **0 **is placed in the formula as there is no present value.

- After that, press
**Enter**. And so, the precise result will appear.

### 2. Compute Monthly Interest Rate from Annual Percentage Rate in Excel

Again, we can get the monthly interest rate from the Annual Percentage Rate by doing a simple calculation. Most banking institutions use an annual percentage rate rather than the monthly rate. But, we need to know the monthly interest rate for our own benefit.

**STEPS:**

- Firstly, select cell
**C6**. Here, type the formula:

`=C5/12`

- Now, press
**Enter**. And consequently, the rate will appear in cell**C6**.

### 3. Apply Excel EFFECT Function for Calculating Monthly Interest Rate

Furthermore, we can apply the Excel **EFFECT** function in the case of calculating the Effective Interest Rate where the monthly compounding is present. Effective interest rate is also known as **Annual Percentage Yield** (**APY**), which is higher than the nominal interest rate, also known as **Annual Percentage Rate **(**APR**). Here, weâ€™ll use the **Nominal Interest Rate** which is based on a simple interest to get our desired result. The **EFFECT** function returns the effective annual interest rate.

**STEPS:**

- At first, select cell
**C7**and type the formula:

`=EFFECT(C5,C6)`

- Next, press
**Enter**. Hence, itâ€™ll return the effective interest rate which is per annum.

- Now, select cell
**C8**. Here, type the formula:

`=C7/12`

- Finally, press
**Enter**. Therefore, youâ€™ll get your required monthly interest rate.

**Read more:** How to Calculate Interest Rate from EMI in Excel

**Download Practice Workbook**

## Conclusion

Now you will be able to calculateÂ the **Monthly Interest Rate **in Excel with the above-described methods. Keep using them and let us know if you have any more ways to do the task. Donâ€™t forget to drop comments, suggestions, or queries if you have any in the comment section below.