To convert your annual interest rate to a daily interest rate based on simple interest, divide the annual interest rate by 365, the number of days in a year. For example, say your car loan charges 14.60 percent simple interest per year. Divide 14.60 percent by 365 to find the daily interest rate equals 0.04 percent. Calculate the monthly payment.; Convert the annual rate to a monthly rate by dividing by 12 (6% annually divided by 12 months results in a 0.5% monthly rate).; Figure the monthly interest by multiplying the monthly rate by the loan balance at the start of the month ($100,000 multiplied by 0.5% equals $500 for the first month). Loans have four primary components: the amount, the interest rate, the number of periodic payments (the loan term) and a payment amount per period. One use of the RATE function is to calculate the periodic interest rate when the amount, number of payment periods, and payment amount are known.