Work out effective interest rate instantly with clear inputs, formula shown and shareable results.
The effective rate restates a nominal quote to allow for compounding within the year, so a 9.5% rate compounded monthly actually costs about 9.92%. Comparing quotes with different compounding frequencies requires this conversion.
Effective rate
EAR = (1 + i/m)^m - 1
Figures are estimates. Lenders apply their own rounding, fees and eligibility rules, and rates change. This is not financial advice — confirm the numbers with your lender.
Not quite. APR conventions may include fees but often quote a nominal rate; the effective rate captures compounding only.
The effective rate, which is what banks call APY on savings products.