Money Factor to Interest Rate Converter

Convert a money factor (used in auto financing) to an annual interest rate percentage. This calculator helps borrowers understand financing costs.

Input Parameters

This is typically a decimal value provided by lenders, like 0.0025

How often interest is compounded per year

Number of years for the loan term

Calculation Results

Calculation Formula

APR = Money Factor × (12 × (1 + (Nominal Rate / Compounding Periods)^(Compounding Periods × Years)) - 1)

Where:
- Money Factor: The decimal interest rate provided by the lender
- Compounding Frequency: Number of times interest is applied per year
- Years: Total term of the loan in years
- APR: Annual Percentage Rate

Interest Rate Results

Annual Percentage Rate (APR):

%

Monthly Interest Rate:

%

Loan Comparison

This interest rate can be compared to standard APRs from financial institutions.

Money Factor to Interest Rate Converter Calculator Usage Guide

Learn how to use the Money Factor to Interest Rate Converter calculator and its working principles

What is a Money Factor?

A money factor is a decimal representation of an interest rate used primarily in auto financing. It's simpler to calculate payments with than a traditional interest rate percentage, but it's important to convert it to an APR so you can compare financing offers accurately.

How to Use This Calculator

  1. Enter the Money Factor provided by your lender (typically between 0.001 and 0.004)
  2. Select the Compounding Frequency - monthly is most common for auto loans
  3. Specify the Loan Term in years
  4. Click the Calculate button

Understanding the Results

  • APR (Annual Percentage Rate): This is the annualized interest rate including all fees
  • Monthly Interest Rate: The interest portion of each monthly payment
  • The loan comparison shows what a $20,000 loan would cost at the calculated interest rate

Example

If your lender offers financing at a money factor of 0.0025 with a 5-year term, the calculator will show approximately an 8.25% APR. This is significantly higher than the 6% APR typically quoted for similar conventional auto loans.

Important Notes

Money factors are typically used for shorter-term loans and may be subject to different pricing structures than standard APRs. Always compare the total cost of financing by looking at both the money factor and the APR.