Calculate the true cost of borrowing with the Effective Interest Rate. Compare loans, mortgages, and credit products by accounting for compounding frequency and additional fees.
Principal amount borrowed
Stated annual interest rate
How often interest compounds
Length of loan in years
Upfront loan processing fee
Total closing and administrative costs
Discount points (% of loan amount)
Insurance, appraisal, and other fees
How often payments are made
Penalty for early repayment (% of balance)
The Effective Interest Rate (EIR) represents the true annual cost of borrowing, accounting for compounding frequency and all associated fees and costs.
Compare different loan offers by looking at the effective interest rate rather than just the nominal rate.
Evaluate mortgage options including points, fees, and different payment schedules.
Make informed borrowing decisions by understanding the true cost of credit.
Budget accurately by knowing the real cost of financing major purchases.