Interest Rate Converter
Convert between annual, monthly, and daily rates and compute effective interest rates.
Input Information
Result
The Interest Rate Calculator converts between annual, monthly, and daily rates and shows the difference between nominal and effective (compound) interest rates. Useful for comparing the real interest of deposits, loans, and savings products.
Term Glossary
- Nominal Interest Rate
- The stated interest rate without considering compounding. This is the rate quoted by financial products.
- Effective Interest Rate
- The actual interest burden or yield including compounding. The more frequent the compounding, the higher it is relative to the nominal rate.
- Compound Interest
- Interest added to the principal for the next period's calculation; yields more than simple interest.
- Compounding Frequency
- How often interest is added to principal: annually, monthly, daily, etc.
- 1
Enter the rate
Type the quoted figure exactly as advertised.
- 2
Pick the input unit
Choose annual, monthly, or daily — the other two convert automatically.
- 3
Set compounding frequency
Crediting events per year (12 monthly, 365 daily) drive the effective-rate math.
- 4
Compare nominal vs effective
The table lines both scales up side by side for product comparisons.
Example 1 — a deposit at 5% nominal, compounded monthly
- Monthly: 5/12 = 0.4167%; daily: 5/365 = 0.1370%
- Effective: (1+0.05/12)^12 − 1 = 5.1162% — an extra 0.1162 points per year
- On 10 million won that is about 11,600 extra won in a year
Example 2 — a card cash advance quoting 0.05% daily
- Annualized: 0.05 × 365 = 18.25% (monthly 1.5208%)
- Effective under monthly crediting: (1+0.1825/12)^12 − 1 ≈ 19.8566%
- 'Just 500 won a day' on a million-won balance means roughly 200,000 in interest over a year
Same digits, wildly different money — unit and frequency change everything. Step one of any comparison is normalizing every quote to annual nominal and effective terms.
Interest Rate Conversion Formulas
1. Annual/Monthly/Daily Rate Conversion
- Annual = Monthly × 12 = Daily × 365
- Monthly = Annual ÷ 12
- Daily = Annual ÷ 365
2. Effective Interest Rate
※ n = compounding frequency per year (12 for monthly, 365 for daily)
3. Effective Rate Examples by Compounding Frequency (Nominal 5%/year)
Annual (1x): (1+0.05/1)^1 - 1 = 5.0000%
Semi-annual (2x): (1+0.05/2)^2 - 1 = 5.0625%
Quarterly (4x): (1+0.05/4)^4 - 1 = 5.0945%
Monthly (12x): (1+0.05/12)^12 - 1 = 5.1162%
Daily (365x): (1+0.05/365)^365 - 1 = 5.1267%
💡 Interest Rate Comparison Tips
1. Compare Using Effective Rates
Always compare deposit, savings, and loan products using effective rates. The same nominal 5% monthly-compounding product yields more than annual compounding.
2. Compare Loans Using Monthly Rates
Comparing loan products by monthly payments is more intuitive. Converting the annual rate to a monthly rate lets you immediately assess monthly interest burden.
3. Harness the Power of Compounding
Compound investments grow more over longer periods. Choosing products with more frequent compounding (monthly, daily) yields higher real returns at the same nominal rate.
QIs multiplying by twelve enough to annualize a monthly rate?
For the nominal figure, yes — 0.4% monthly × 12 = 4.8% annually. But if interest actually compounds each month, the true yearly yield is (1+r)^12 − 1: monthly 0.4% compounding produces about 4.907%, above the naive 4.8%. This tool shows the nominal conversion and lets you check the compounded reality in the effective-rate field.
QHow risky is a card ad quoting '0.05% daily'?
A daily 0.05% annualizes to 18.25% before any compounding, which pushes the real burden higher still. Small daily numbers feel safe while hiding near-usury annual rates — always convert to an annualized figure before judging such offers.
QAre 'effective' and 'real' rates the same thing?
No. The effective rate reflects compounding frequency on a nominal basis (5% nominal monthly-compounding → 5.1162% effective). The real rate strips inflation (5% yield under 3% inflation ≈ 2% real). Compare products with the former; judge your savings strategy with the latter — good products pass both.
QWhat should I enter as the compounding frequency?
Enter how many times per year interest is credited back to principal per the product's terms: 1 for annual, 2 semi-annual, 4 quarterly, 12 monthly, 365 daily. Korean time deposits typically behave like annual compounding at maturity; installment savings run closer to monthly. When unsure, 12 gives a reasonable middle estimate.
QHow does this help when refinancing a loan?
When quotes use different conventions, never compare raw numbers. Lender A at '6% annual, monthly compounding' versus lender B at '0.52% monthly': B's nominal annualizes to 6.24%, yet its effective rate is about 6.42% — costlier than A. Normalize both through this calculator, then add any remaining prepayment penalties.