APR to EAR Calculator
APR to EAR Calculator
APR is a nominal rate that doesn't account for how often interest compounds within the year. EAR (also called APY on savings products) reflects the true annual rate once monthly, daily, or other compounding is factored in — the more frequent the compounding, the bigger the gap between APR and EAR.
Borrowers and savers use this to compare offers fairly: two loans or savings accounts with the same advertised APR but different compounding frequencies actually cost or pay differently, and EAR is the number that makes them directly comparable.
- EAR ≥ APR Always: More frequent compounding always produces an EAR equal to or greater than the nominal APR.
- Formula: EAR = (1 + APR/n)ⁿ − 1, where n is the number of compounding periods per year.
- Use for Fair Comparison: Always compare EAR, not APR, when comparing two offers with different compounding frequencies.
Why is EAR higher than APR?
Because interest is added to the balance before the end of the year (e.g., monthly), and that added interest itself starts earning interest — the more often this happens, the larger the gap.
Is APY the same as EAR?
Yes — APY (Annual Percentage Yield) is the same calculation as EAR, just the term used for savings and investment products rather than loans.
APR to EAR Calculator
APR is a nominal rate that doesn't account for how often interest compounds within the year. EAR (also called APY on savings products) reflects the true annual rate once monthly, daily, or other compounding is factored in — the more frequent the compounding, the bigger the gap between APR and EAR.
Borrowers and savers use this to compare offers fairly: two loans or savings accounts with the same advertised APR but different compounding frequencies actually cost or pay differently, and EAR is the number that makes them directly comparable.
- EAR ≥ APR Always: More frequent compounding always produces an EAR equal to or greater than the nominal APR.
- Formula: EAR = (1 + APR/n)ⁿ − 1, where n is the number of compounding periods per year.
- Use for Fair Comparison: Always compare EAR, not APR, when comparing two offers with different compounding frequencies.
Why is EAR higher than APR?
Because interest is added to the balance before the end of the year (e.g., monthly), and that added interest itself starts earning interest — the more often this happens, the larger the gap.
Is APY the same as EAR?
Yes — APY (Annual Percentage Yield) is the same calculation as EAR, just the term used for savings and investment products rather than loans.