Effective Interest Rate

The total cost of taking a loan is more than just comparing the interest rates charged. 

Take, for example, 2 loans both with a quantum of $10,000 and 1 year in tenure, with the 1st loan at 11% p.a per year without any fees, while the 2nd has a lower interest of 10% p.a, but has a one-time processing fee of $1,000 and an annual fee of 1%. Its total fees of $1,000 and $100 make it slightly more expensive than the 1st, with an Effective interest rate (EIR) of 21%, as you will pay a total of $2,100 in interest and fees. 

EIR is meant to be an easy way to compare 2 loans. However, note that there are many ways to calculate EIR - for example, even the projected inflation rate can be used(although seldom), as one dollar today might not be the same tomorrow, to show a lower EIR. Loan calculators may show slight differences depending on whether payments are assumed to be made at the start or end of the month, or due to rounding differences.

Please note the EIR (if any) shown on your dashboard is entered by the Financing Partners. You should consider using our loan calculator to break down your monthly instalment, total cost etc when Finding The Loan best suitable for you.