International Journal For Multidisciplinary Research

E-ISSN: 2582-2160   •   Impact Factor: 9.24

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Volume 8 Issue 4
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Comparative Study of Numerical Methods for Estimating Effective Interest Rate in Household Instalment Plans

Author(s) Mrs. Kejia Jandu, Dr. Vinod Kumar Sharma
Country India
Abstract Numerical methods are useful for solving equations that arise from real-life problems when exact algebraic solutions are difficult. One such real-life problem is the estimation of the effective interest rate in household instalment plans. In many household purchases, the consumer knows the cash price, monthly instalment, and repayment period, but the actual monthly interest rate is not directly visible. When the interest rate is treated as the unknown variable, the equated monthly instalment equation becomes nonlinear. This paper compares four numerical methods, namely the bisection method, regula falsi method, secant method, and Newton-Raphson method, for estimating the monthly interest rate in household instalment plans. The dataset of twelve realistic household instalment cases are used. All four methods are solved using Python programming. The methods are compared on the basis of speed and accuracy using number of iterations, function evaluations, residual error, root error, and average execution time. The results show that Newton-Raphson required the fewest iterations, while the secant method gave very high accuracy without requiring derivative calculation. The bisection method was slower but reliable. The study shows that numerical methods can help consumers estimate hidden borrowing costs in instalment-based financial decisions.
Keywords Numerical Methods, Nonlinear Equation, Bisection Method, Regula Falsi Method, Secant Method, Newton-Raphson Method, EMI, Effective Interest Rate, Household Instalment Plans
Field Mathematics
Published In Volume 8, Issue 4, July-August 2026
Published On 2026-07-13
DOI https://doi.org/10.36948/ijfmr.2026.v08i04.83646
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CrossRef DOI prefix of IJFMR is 10.36948/ijfmr

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