Find the annual interest rate on a loan or investment given the principal amount, repayment amount, and term.
| Item | Value |
|---|
An interest rate is the cost of borrowing money or the return on lending/investing it, expressed as a percentage of the principal per unit of time (typically per year). Interest rates affect every financial product — from mortgage rates to savings account returns, credit cards to term deposits.
The nominal rate is the stated rate. The effective annual rate accounts for compounding and represents the true annual cost or return. These differ whenever compounding occurs more than once per year:
| Nominal Rate | Compounding | Effective Annual Rate | Difference |
|---|---|---|---|
| 6.00% | Annual | 6.000% | 0 |
| 6.00% | Quarterly | 6.136% | +0.136% |
| 6.00% | Monthly | 6.168% | +0.168% |
| 6.00% | Daily | 6.183% | +0.183% |
| Rate Type | Current Rate | Set By |
|---|---|---|
| RBA Cash Rate Target | 4.35% | Reserve Bank of Australia |
| Major bank variable mortgage (standard) | 6.3–7.0% | Commercial banks |
| High-interest savings account (competitive) | 5.0–5.2% | Banks/credit unions |
| Term deposit (12 months) | 4.9–5.4% | Banks/credit unions |
| Credit card purchase rate | 17–23% | Credit card issuers |
| 10yr government bond yield | ~4.3–4.7% | Market-determined |
What is the interest rate set by the RBA?
The RBA (Reserve Bank of Australia) sets the cash rate target — the rate at which banks lend to each other overnight. As of June 2026, the cash rate is 4.35% following three increases in early 2026. The cash rate directly influences all other Australian interest rates though the impact varies by product.
What is the difference between APR and interest rate?
The interest rate is the base cost of borrowing. APR (Annual Percentage Rate), called the comparison rate in Australia, adds most fees and charges to give a single percentage representing the true annual cost. A home loan at 6.2% interest with $400/year in fees has a comparison rate of approximately 6.4%. Always compare comparison rates, not just interest rates.
How do I calculate the interest rate on a loan?
If you know principal (P), interest amount (I), and time (t in years): r = I ÷ (P × t). For example: paid $3,000 interest on $20,000 over 2 years: r = $3,000 ÷ ($20,000 × 2) = 7.5% simple annual rate. For loans with compound interest and monthly repayments, use the RATE function in Excel or this calculator for the effective rate.