APR / APY Converter
| Frequency | Effective APY |
|---|---|
| Annually | - |
| Quarterly | - |
| Monthly | - |
| Daily | - |
APR is the stated nominal rate. APY is what that rate actually yields per year once compounding is counted. Loans quote APR (you pay interest on what you owe); savings quote APY (you earn interest on what compounds) — the same number means different things in each context, and fees on loans are not part of either number here.
APR vs APY — What's the Difference?
APR and APY are two ways of quoting an interest rate, and confusing them is expensive in both directions: APR describes what a loan costs you, APY describes what savings pay you. The difference between them is compounding.
- APR (Annual Percentage Rate) — the stated nominal rate, without compounding counted. You see APR on loans and credit cards.
- APY (Annual Percentage Yield) — the rate you actually end up with over a year once compounding is counted. You see APY on savings products.
The compounding effect
Compounding frequency turns the same nominal rate into different real results. A 6% nominal rate compounded monthly is not 6% over a year — it is slightly more, because each month's interest starts earning interest itself. The table in the calculator above shows exactly how a single nominal rate changes as compounding gets more frequent (annual → quarterly → monthly → daily).
The rule of thumb: for a borrower, APR is the honest headline number (you pay interest on what you owe, usually without compounding in the quoted APR). For a saver, APY is the honest headline number (your interest compounds and that is included). Comparing a loan by its APY or a savings account by its APR will make either side look better or worse than it is — compare like with like.
What the converter does
Enter a nominal annual rate and the compounding frequency of the product you're looking at. The calculator returns the effective APY, the actual money a given principal earns in a year (and how much of that is purely from compounding), plus a reference table across frequencies.
A note on loans: the quoted APR on loans generally reflects the interest and mandatory fees the lender includes — it is not the same as APY, and it does not count penalties or optional charges. Always read what a lender counts in its APR before comparing.
Practical takeaways
- Savings: compare APY, not the nominal rate — that is the number your money actually grows at.
- Borrowing: compare APR, and check what fees it includes.
- The more frequent the compounding, the larger the gap between nominal rate and effective yield — the calculator table makes the gap concrete.
- For long-term investing, the same compounding math powers your returns: see the compound interest calculator and the expense ratio calculator for what eats into that compounding.
This article is for general educational purposes only and is not personalized financial advice. Consider consulting a licensed financial advisor for guidance specific to your situation.