Discrepancies in calculating monthly interest rate

[Joe Henry]

I see a lot of sites saying that to calculate the monthly interest rate on a loan you just divide the annual rate by 12. 

So let's say we have a 100k loan at 5%. The first year your interest payment would be 5k if you pay all at once. But if you divide the 5% by 12 and make monthly payments the total interest for the year is $5116.19...

Is it just accepted that you end up paying more interest than what your rate actually is? Or is my math wrong? Or are these sites just over simplifying things?

[Daniel Chang]

Joe,

I think your issue is in the difference of APR and APY. You have an APR of 5% but paid monthly. Hence it's compounded 12 times per year.

The equation is:

(1+ 0.05/12) ^ 12 -1 = 5.1162%

That's where you are getting your $5116.19 from.