Convert a nominal annual rate into the effective annual rate, depending on how often interest is charged.
Effective annual rate
6.17 %
Without fees or commissions, which the official APR also includes.
Nominal rate vs effective annual rate
The nominal annual rate is the base rate a bank applies. If interest is charged monthly, each month you pay or earn the nominal rate divided by 12, and that interest itself accrues interest. The effective annual rate shows the real yearly cost or return once that compounding is included.
Formula: effective = (1 + nominal / n)n − 1, where n is the number of times interest is charged per year.
Official effective rates on loans also include fees, so they are usually higher than what this calculator shows.
Frequently asked questions
Which one should I compare?
The effective rate, because it includes compounding and, in official figures, fees.
Why are they equal with yearly interest?
If interest is charged once a year there is no compounding within the year, so nominal and effective match.
Does a higher number of periods always raise the rate?
Yes, for the same nominal rate, more frequent charging means a slightly higher effective rate.
Indicative results. This is not financial advice.
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