AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
Multiply a monthly rate by 12 to get the simple (nominal) yearly rate, so 5% a month is 60% a year. If interest is charged on interest each month, use (1 + monthly rate) to the power of 12, minus 1: 5% a month then works out at about 79.6% a year. Banks in Nigeria usually quote per annum, while many app lenders quote per day, per month or per tenor, so convert before you compare.
A bank offer letter says 39% per annum. A loan app says 5% per month. A cooperative says 10% flat. These are three different ways of describing price, and you cannot tell which is cheapest until they are on the same basis. Converting monthly to yearly, and back, is the core skill. It takes one multiplication or one power calculation on any phone calculator.
Method 1: simple conversion (× 12)
The simple, or nominal, yearly rate is the monthly rate multiplied by 12. It assumes interest is never charged on interest. It is the right comparison when interest is worked on the original amount, or when you clear the interest every month, as you do with most instalment loans.
- 2% a month × 12 = 24% a year
- 3% a month × 12 = 36% a year
- 5% a month × 12 = 60% a year
Method 2: compounded conversion
When unpaid interest is added to the balance and the next month's interest is worked on that bigger figure, the true yearly cost is higher. The formula is (1 + r)12 − 1, where r is the monthly rate as a decimal. For 5%: 1.05 to the power of 12 is about 1.7959, minus 1 gives 0.7959, or 79.6% a year. On a phone calculator, type 1.05, then press × and = eleven times, or use the xy key.
Conversion table
| Monthly rate | Simple yearly (× 12) | Compounded yearly |
|---|---|---|
| 2% | 24% | 26.8% |
| 3% | 36% | 42.6% |
| 4% | 48% | 60.1% |
| 5% | 60% | 79.6% |
| 10% | 120% | 213.8% |
| 15% | 180% | 435.0% |
At low rates the two methods give similar answers. At the rates common on short-term app loans, the gap becomes very large, which is why the method matters.
Going the other way: yearly to monthly
Bank offers are quoted per year, so you often need a monthly figure to compare with an app. Divide the nominal yearly rate by 12. Sterling Bank's loans page (checked October 2026), for example, lists its payroll personal loan at 39% per annum; 39 ÷ 12 = 3.25% a month. If a rate is stated as an effective yearly rate already compounded, the monthly equivalent is (1 + yearly rate)1/12 − 1, which for 39% is about 2.78% a month. Offer letters normally say which they mean; if not, ask.
Which method lenders tend to use
- Banks
- Usually quote a nominal rate per annum on a reducing balance, with fees as separate percentages. Divide by 12 for the monthly figure.
- App lenders
- Often quote per day, per month or for the whole tenor. Check the agreement; a 30-day rate is effectively a monthly rate.
- Cooperatives and some informal lenders
- Often quote a flat rate per year on the original amount, which is not comparable with a reducing-balance rate until converted. See how cooperative loan interest is calculated.
- Credit cards
- Usually quote a monthly rate applied to the carried balance; see how credit card interest is calculated.
These are common patterns, not rules; your agreement is what counts. For digital lenders, the FCCPC's Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations, 2025 require interest rates and fees to be disclosed before any transaction, but they do not prescribe a single format such as an annual percentage rate, so you may still need to convert.
Worked example: an app rate against a bank rate
Labelled example. App A charges 5% a month. Bank B charges 39% a year on a reducing balance, plus 3% in fees on a 12-month loan. In simple terms App A is 60% a year and Bank B is 39% before fees. Spread over a 12-month loan, Bank B's 3% fee paid at the start adds about 6 percentage points in this example, taking it to roughly 45% a year, still well below App A's 60%. For one month, though, Bank B's fees would weigh far more heavily. Converting the rate tells you the price of time; you still need the total cost for the period you actually need the money, using cost per ₦1,000 borrowed.
The reverse also holds. If App A's loan is only needed for three weeks and Bank B would lock you into a year with an upfront fee, App A could cost fewer naira overall despite the higher rate. The rate answers which is dearer per month; the total cost answers which is dearer for your situation.
Common mistakes
- Treating a flat rate as if it were a reducing-balance rate. A 10% flat yearly rate on an instalment loan costs close to 18% on a reducing basis; see APR vs flat fee.
- Forgetting fees. A rate converted perfectly still leaves out processing and insurance charges.
- Converting a daily rate by × 30 and then × 12. Use × 365 for the simple yearly figure: 0.5% a day is 182.5% a year. See daily interest on loan apps.
Where Pryme fits
Pryme's Savings Boxes show their rate in the app; the same conversion lets you compare a savings rate with what a loan would cost you. This is information, not financial advice.
Questions people ask
What is 5% monthly interest per year?
60% a year on a simple basis, or about 79.6% a year if interest is charged on unpaid interest each month.
How do I convert annual interest to monthly?
Divide the yearly rate by 12 for the nominal monthly rate. For 39% a year that is 3.25% a month.
Is 3% monthly interest high in Nigeria?
It is 36% a year simple. Whether that is high depends on the alternatives; compare it with the per annum rates banks publish and with the total cost of each offer.
Why do loan apps quote monthly rates and banks yearly rates?
Short loans are easier to price per month or per tenor, while longer bank loans are conventionally quoted per annum. Convert both to the same basis to compare.
Sources
- Sterling Bank: Loans (payroll, vehicle, home and SME loan terms) · accessed Oct 2026
- FCCPC: Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations, 2025 (made 21 July 2025) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.