Interest Rate Converter
About this converter
Interest rates are quoted in different ways: per year, per month, per day, with or without compounding. That makes lenders hard to compare. This converter takes one rate and shows what it equals as a daily, monthly, quarterly, semi-annual and annual rate, and its effective annual rate once compounding is included.
The effective annual rate, or EAR, is the most honest number because it shows what you actually pay or earn in a year. A card charging 3% a month is not 36% a year. It is 42.6% once compounded.
How to use it
- Enter the Input Rate as a percentage.
- Choose the Input Rate Period it applies to: annual, semi-annual, quarterly, monthly or daily.
- Choose the Compounding used: continuous, daily, monthly, quarterly, semi-annual or annual.
- Read the converted rates and the effective annual rate.
Conversion rules
The annual rate (APR) is the periodic rate times the periods per year. The effective annual rate is EAR = (1 + APR/n)n − 1 where n is the compounding frequency, and EAR = eAPR − 1 for continuous compounding. A lower periodic rate is just the APR divided by the periods.
Worked example
12% a year, compounded monthly
| Daily rate | 0.032877% |
| Monthly rate | 1.0000% |
| Quarterly rate | 3.0000% |
| Semi-annual rate | 6.0000% |
| Annual rate (APR) | 12.0000% |
| Effective annual rate | 12.6825% |
Monthly compounding lifts a 12% nominal rate to 12.68% effective. That 0.68% is what you pay on top of the headline rate.
Tips and common mistakes
- Always compare loans and deposits on effective annual rate.
- Credit cards quote a monthly rate, so multiply carefully. 3.5% a month is over 51% effective.
- A rate with 'p.a.' is annual. Without it, check the period.
- Flat rates on loans understate the true cost. Convert them using the EMI calculator.
- Continuous compounding is mostly a mathematical idealisation.
Frequently asked questions
What is the effective annual rate?
It is the actual yearly return or cost after compounding is included.
How do I convert a monthly rate to annual?
Multiply by 12 for the nominal rate, or use (1 + m)^12 − 1 for the effective rate.
Why is EAR higher than APR?
Because interest earns interest within the year. The more often it compounds, the bigger the gap.
Which compounding is the default?
Most Indian bank deposits compound quarterly. Credit cards compound monthly or daily.
What is continuous compounding?
It is the limit as compounding gets infinitely frequent, using e^rate.
Can I convert a daily rate?
Yes. Choose daily as the input period.