Use our calculator to calculate interest rate in Nigeria.
- Enter Loan Amount: Input the amount you want to borrow in “Loan Amount (₦)”.
- Enter Interest Rate: Input the annual interest rate in “Interest Rate (%)”.
- Enter Loan Duration: Input the duration of the loan in “Loan Duration (Months)”.
- Calculate: Click the “Calculate Interest” button.
- View Results: Check the Total Interest and Total Payment displayed by the calculator.
Nigerian Lenders Interest Calculator
Calculated Interest
Loan Amount: ₦
Total Interest: ₦
Total Payment: ₦
However if you care more about understanding the interest deeply keep reading.
Have you ever considered taking out a loan? There is a term called interest during the process and calculating it should be one of your top priorities. But why?
You only understand the true cost of the loan by calculating the interest. This will help you to budget effectively and avoid unexpected financial burdens.
When you know the interest you can easily compare different loan offers and estimate your monthly payments and repayment schedule in general.
What is an interest?
An interest rate is the percentage of the loan amount that borrowers pay as interest over a specified period.
Basic Types of Interest Rates
| Type | Description |
| Fixed | Remains constant over time. |
| Variable | Changes based on market conditions. |
| Simple | Calculated on original principal only. |
| Compound | Calculated on principal + accumulated interest. |
- Fixed Rate: This rate remains constant.
- Example: When you borrow NGN 100,000 with a 10% fixed rate you will pay NGN 10,000 each year.
- Variable Rate: This kind of rate changes with market conditions so payments can vary.
Example: The loan may start from 8% or even go up or down. - Simple Rate: Calculated only on the initial amount.
Example: NGN 100,000 loan with 5% simple interest adds NGN 5,000 yearly. - Compound Rate: Interest grows on both the principal and past interest.
Example: NGN 100,000 with 5% compound rate monthly would grow to NGN 105,116 in a year.
How to Calculate Interest Rate?
| Term | Calculation & Example (on NGN 100,000) |
| Nominal Rate | Given as a percentage. Example: 6% = NGN 6,000 annually. |
| Real Rate | Real Rate = Nominal Rate – Inflation Rate. Example: 5% – 2% = 3%. |
| APR | APR = (Interest + Fees) / Principal Amount. Example: 20% APR = NGN 20,000 annually. |
| EAR | EAR = (1 + (Nominal Rate / n))^n – 1. Example: 5% nominal monthly = 5.12% EAR. |
| Fixed Rate | Interest = Principal x Rate. Example: 10% = NGN 10,000 yearly. |
| Variable Rate | Changes based on market; Example: 8% to 9% = NGN 9,000 annually. |
| Simple Interest | Interest = Principal x Rate x Time. Example: 5% for 1 year = NGN 5,000. |
| Compound Interest | A = P (1 + r/n)^(nt). Example: 5% compounded monthly = NGN 105,116 in 1 year. |
-
1. Nominal Rate
- Definition: The interest rate displayed on loans or investments.
How it works: For example, if you hold a bond with a 6% nominal rate, you earn NGN 6,000 annually on an investment of NGN 100,000. Simple, right? -
2. Real Rate
- Definition: The interest rate adjusted for inflation.
Calculation:
Real Rate = Nominal Rate – Inflation Rate
Example: If the nominal rate is 5% and inflation is 2%, your real rate is 3%, meaning your money’s purchasing power increases. -
3. APR (Annual Percentage Rate)
- Definition: The total annual cost of borrowing, including fees.
Calculation:
APR = (Total Interest + Fees) / Principal Amount
Example: If you incur NGN 20,000 in interest and fees on a NGN 100,000 loan, your APR would be 20%. -
4. EAR (Effective Annual Rate)
- Definition: The actual interest rate earned in a year, accounting for compounding.
Calculation:
EAR = (1 + (Nominal Rate / n))^n – 1 (where n is the number of compounding periods)
Example: With a nominal rate of 5% compounded monthly, the EAR is approximately 5.12%. -
5. Fixed Rate
- Definition: An interest rate that remains constant over time.
Calculation:
Interest = Principal x Fixed Rate
Example: On a NGN 100,000 loan at a 10% fixed rate, you will pay NGN 10,000 each year. -
6. Variable Rate
- Definition: An interest rate that fluctuates over time.
Example: If your loan starts at 8% and rises to 9%, you will pay NGN 9,000 on a NGN 100,000 loan. -
7. Simple Interest
- Definition: Interest calculated solely on the original principal.
Calculation:
Interest = Principal x Rate x Time
Example: When you borrow 100,000 at 5% for one year you would pay NGN 5,000 in interest. -
8. Compound Interest
- Definition: Interest calculated on both the principal and the previously earned interest.
Calculation:
A = P (1 + r/n)^(nt)
Example: With NGN 100,000 at a 5% interest rate compounded monthly for one year, you will have approximately NGN 105,116.