A reverse loan calculator is a financial tool that lets you calculate the interest on a loan in reverse, using the annuity coefficient as part of the calculation.
This tool is also known as a reverse interest calculator.
Use a reverse loan calculator to independently verify the interest rate quoted by the lender.
To calculate the annual interest rate, enter the loan amount, the loan term in months, and the monthly payment into the appropriate fields of the calculator.
Another type of reverse loan calculator estimates the
total loan amount based on how much the borrower can afford to pay each month.
How it works
The annuity ratio plays a crucial role in calculating the annuity payment. The monthly payment is determined by multiplying
the loan amount by the annuity ratio — this is how a
standard annuity calculator works.
In this tool, the process is reversed: the annuity ratio is derived from the monthly payment, and only then is the annual interest rate calculated.
Financial institutions may use different formulas to compute the annuity ratio, so the resulting amounts may vary.
Therefore, although the annual interest rate can be calculated with decimal precision,
the interest rate shown by the reverse loan calculator is for informational purposes only.
It provides an approximate rather than an exact value.