What is the formula of calculating effective interest rate on loan?

The following is the calculation formula for the effective interest rate:

r = [1 + (i/n)]^n - 1

Where:

r = effective interest rate

i = nominal annual interest rate

n = number of compounding periods per year

Effective interest rate calculator is the one that will provide you complete information about the actual amount you need to pay on loan. This will help you to differentiate among different lenders or from the source you are taking loan. 



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