Enter loan details and click Calculate EIR to see results.
How It Works
Enter Loan Details
Input the nominal interest rate, compounding frequency, loan amount, term, fees, and insurance costs.
Choose Frequency
Select how often interest compounds: daily, monthly, quarterly, semi-annually, or annually.
Calculate EAR
The calculator converts your nominal rate to the Effective Annual Rate considering all compounding periods.
View Full Analysis
Get total cost, monthly payment, APR vs EAR comparison, Rule of 72, amortization summary, and frequency comparison.
Understanding EIR, EAR & APR
The Effective Interest Rate (EIR), also known as the Effective Annual Rate (EAR), is the true interest rate you pay on a loan when compounding is taken into account. Unlike the nominal (stated) rate, EAR reflects the actual cost of borrowing because it accounts for how often interest is calculated and added to your balance.
where: r = nominal rate, n = compounding periods per year
The Annual Percentage Rate (APR) is the nominal rate that lenders are legally required to disclose. It does NOT include compounding within the year. This means APR can understate the true cost of your loan compared to EAR. For example, a 6% APR compounded monthly actually costs 6.17% per year when you factor in monthly compounding.
The Rule of 72 is a quick mental math shortcut: divide 72 by the annual interest rate to estimate how many years it takes for your money to double. For example, at 8% interest, your money doubles in approximately 72 / 8 = 9 years. This applies to both investments and debt growth.
When evaluating a loan, always compare the EAR across different offers, especially when fees and insurance are involved. A loan with a lower nominal rate but high fees may actually cost more than one with a slightly higher rate but no fees. This calculator includes all upfront costs to give you the true cost of borrowing.