Definitions for

**"Effective interest rate"****Related Terms:**Interest rate, Annual equivalent rate, Aapr, Rate, Annual percentage rate (apr, Apr, Interest rates, Annual percentage rate, Effective annual interest rate, Annual interest rate, Aer, Nominal interest rate, Nominal rate, Comparison rate, Apr - annual percentage rate, Interest accrual rate, A.p.r, Annual percentage rate - apr, Effective rate, Rate of interest, Monthly periodic rate, Ear, Base interest rate, Discount, Daily periodic rate, Money factor, Variable interest, Periodic rate, Cost of funds, Margin, Til, Annual percentage yield, Apy, Discounted rate, Discounted rate mortgage, Tiered interest rate, Note rate, Index rate, Discount point, Reference rate, Fixed rate, Discount points, Mortgage rate, Svr, Annual cap, Variable interest rate, Introductory apr, Standard variable rate, Variable rate, Base rate

The actual rate of return to the investor considering commitment fees, loan points or other fees. Also called yield.

The annual rate at which an investment grows in value when interest is credited more often than once a year.

See yield to maturity. To Top

The interest rate if an annuity is compounded annually. For example, with an initial $10,000 deferred annuity investment, over one year at an effective rate of 10%, $1,000 will be earned in interest. Also called an annual effective rate or an annual effective yield.

The actual rate of return or yield to an investor. The actual rate of interest paid by a borrower.

The rate of earning on a bond investment based on the actual price paid for the bond, the coupon rate, the maturity date and the length of time between interest dates, in contrast with the nominal interest rate.

Interest per dollar per period; the nominal annual interest rate divided by the number of conversion periods per year.

The calculated interest rate that may take account of stock, fees and compounding, in contrast to a quoted rate of interest.

The percentage of interest actually being paid by the borrower for the use of the money including certain expenses for obtaining the loan. See Annual Percentage Rate.

Percentage return for a given period, calculated as compound interest.

The cost of credit on an annual basis expressed as a percentage. Includes up-front costs paid to obtain the loan. Usually a higher amount than the interest rate stipulated in the mortgage note. Useful in apples to apples comparison in loan programs with different rates and costs.

The effective interest rate is your true interest-rate cost of borrowing stated as an annual rate. It may be shown on an after-tax basis, adjusting for a mortgage interest deduction. The effective rate on a mortgage or consumer loan includes fees, points and other charges that you pay when you close the loan. The effective rate also includes compounded interest. Higher closing costs or more frequent compounding result in a higher effective interest rate.

The actual cost the borrower pays in interest for his loan. Also called true interest rate.

interest rate stated as a yearly rate and compounded yearly.

The rate actually being charged. Some loans like GPM (graduated payment mortgage) and some ARMs (adjustable rate mortgages) actually allow you to pay at a lower rate while the loan is accruing at higher rate. This means your loan balance is going up (negative amortization). building may be more than or less than the appraiser's estimate.

Rate of interest on a loan, which includes compounding, as opposed to the stated rate. For example, a loan rate might be published at 10%, but with compounding the true (effective) rate is somewhat higher based on number of compounding periods.

The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate on the mortgage note. Useful in comparing loan programs with different rates and points.

The percentage of interest that is actually being paid by the borrower for the use of the money, distinct from nominal interest.

This is the actual interest rate paid on a loan or mortgage. In Canada, mortgages typically have a higher effective interest rate because of the fact that interest rates are compounded semi-annually or twice per year.

The interest rate in a lease stated on an annual basis. The rate includes the compounding effect of interest during the year.

Interest rate or rate of return that includes the effects of compounding. Also known as the annual percentage rate (APR). Contrast with nominal interest rate. See also interest rate.

The real rate of interest after the effects of compounding are included. More frequent compounding adds up to a higher effective rate.

AKA: Annual Effective Rate or Annual Effective Yield. The interest rate earned if compounded annually. If a person has $10,000 and leaves it for one year at an effective rate of 10%, they will earn $1,000 of interest. The interest rate for one day when compounded daily is approximately 0.0261%. Note that 10% divided by 365 days is approximately 0.274%.

Rate of interest which will cause the present value of a note to increase to the maturity value by the maturity date

Interest rate that recognizes the nominal or annual interest rate plus the extra interest gained because of compounding.

Return To Glossary Index Cost of credit on a yearly basis expressed as a percentage. It includes any up-front costs paid to obtain the loan, and is, usually a higher amount than the interest (note) rate in the mortgage. This is useful when comparing loan programs with different rates and points.

Real rate of interest on a loan which is the coupon rate divided by the net proceeds of the loan.

The actual rate or yield of a loan, regardless of the amount stated on the debt instrument.

Syn: annual percentage rate.

The cost of a mortgage expressed as a yearly rate, usually higher than the interest rate on the mortgage since this figure factors in the up-front costs of acquiring the loan.

The actual annual interest rate that accrues including the effects of compounding.

The actual rate of interest you receive on a deposit, or pay on a loan, once the frequency of compounding is taken into account.

Election Period Eleven bond index

Effective margin (EM) Effective net worth