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Effective Interest Rate Calculator
Calculate the true effective interest rate of a loan or investment, accounting for how often interest compounds.
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What is Effective Interest Rate?
The effective interest rate reflects the real annual cost or return of a loan or investment once compounding is factored in, allowing fair comparisons between products with different compounding schedules.
The Formula
Effective Interest Rate = (1 + Nominal Rate ÷ n)n – 1, where n is the number of compounding periods per year. This is the same underlying formula used for EAR and AER calculations.
Note: This tool is for general educational and planning purposes only.
Last reviewed August 2026