APR to Monthly Rate Calculator Convert APR to Monthly Interest Rate
Convert any APR to a monthly interest rate instantly. Supports both nominal APR (simple division) and effective APR (compound formula). See daily, weekly, quarterly, and annual rates alongside the full formula.
Country
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Rate Conversion
Conversion Direction
%
Enter the APR as a percentage. e.g. 18 for 18%.
%
Enter the monthly rate as a percentage. e.g. 1.5 for 1.5% per month.
type
Nominal APR divides or multiplies by 12. Effective APR uses the compounding formula (1+r)^12−1.
Monthly Rate
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Nominal APR
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monthly rate × 12
Effective APR (EAR)
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(1 + monthly)^12 − 1
EAR − Nominal Gap
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compounding premium
Daily Rate
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Weekly Rate
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Monthly Rate
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Quarterly Rate
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Semi-Annual Rate
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Annual Rate (EAR)
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Full Conversion Breakdown
Same Nominal APR at Different Compounding Frequencies
Compounding
Periods/Year
Periodic Rate
Effective APR (EAR)
EAR − Nominal
Monthly Rate at Common APR Values
APR
Monthly Rate (Nominal)
Monthly Rate (Effective)
EAR
EAR − Nominal
Effective APR vs Nominal APR (Monthly Compounding)
Nominal APR
Effective APR (EAR)
Note: This calculator converts between APR and periodic interest rates using standard financial mathematics. Nominal APR divides or multiplies by the number of periods. Effective APR (EAR) applies the compounding formula. The correct method depends on how your financial product defines its rate. Always check whether your lender or product uses nominal or effective APR.
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🔄 Key Notes
Nominal APR: divide by 12 for monthly rate. Simple, no compounding.
Effective APR (EAR): use (1+r)^(1/12)−1. Accounts for compounding.
EAR is always ≥ nominal APR for the same monthly rate
Credit cards typically quote nominal APR divided daily
There are two standard ways to convert an annual rate to a monthly rate, and they produce different results. The method you use must match the method used by the financial product you are analysing.
APR Type
APR → Monthly
Monthly → APR
Used By
Nominal APR
r = APR ÷ 12
APR = r × 12
Most consumer loans, credit cards (US), mortgages (US)
Effective APR (EAR)
r = (1 + APR)^(1/12) − 1
EAR = (1 + r)^12 − 1
EU mortgages (APRC), savings accounts, some credit products
Why nominal and effective APR differ
Nominal APR treats each period independently and simply divides the annual rate by the number of periods. It does not account for the compounding effect where interest earns interest within the year. Effective APR, also called EAR or effective annual rate, is the actual annual rate earned or paid once compounding is taken into account. For monthly compounding, the effective APR is always slightly higher than the nominal APR because twelve monthly compounding cycles produce slightly more than one annual cycle of growth.
How to use the monthly rate in a payment formula
Once you have the monthly rate r, you can use it directly in the standard annuity payment formula: payment = principal × r / (1 − (1+r)^−n), where n is the number of monthly payments. For a loan with a nominal APR, r = APR/12. For a loan with an effective APR, r = (1+EAR)^(1/12) − 1. Using the wrong rate will produce an incorrect payment amount, so confirming which APR type your lender uses is important before applying the formula.
Frequently Asked Questions
How do I convert APR to a monthly interest rate?+
For nominal APR, divide by 12. A 12% nominal APR gives a monthly rate of 1%. For effective APR, use the formula (1 + APR)^(1/12) − 1. A 12% effective APR gives (1.12)^(1/12) − 1 = 0.9489%, slightly less than 1% because the compounding is already baked in to the annual figure.
What is the difference between nominal and effective APR?+
Nominal APR is a simple annualisation that multiplies the periodic rate by the number of periods without accounting for compounding. Effective APR is the rate that reflects the actual annual cost once compounding within the year is included. For the same monthly rate, the effective APR is always higher than the nominal APR. The gap grows at higher rates and with more frequent compounding.
Which APR type do credit cards use?+
In the United States, credit cards typically quote a nominal APR, and the daily periodic rate is APR divided by 365. In Europe, credit card rates are often expressed as effective APR under consumer credit legislation. The distinction matters when calculating the true cost of carrying a balance, as the effective rate on a US credit card is higher than the stated nominal APR due to daily compounding on unpaid balances.
Is EAR always higher than nominal APR?+
Yes, when compounding occurs more frequently than once per year, the EAR is always higher than or equal to the nominal APR. They are equal only when compounding happens exactly once per year (annual compounding). The more frequent the compounding, the larger the gap between nominal APR and EAR.
What is continuous compounding?+
Continuous compounding is the theoretical limit of increasing compounding frequency infinitely. The effective annual rate under continuous compounding is e^r − 1, where r is the nominal rate and e is Euler’s number (approximately 2.71828). Continuous compounding gives the highest possible EAR for a given nominal rate, but it is rarely used in consumer financial products.
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