How is aer worked out

It does not mean everyone definitely gets this rate. They will need to do credit checks for each individual and then decide who is eligible for this rate of interest. The personal APR is the rate you actually pay once you have applied for the loan and the credit company has assessed your suitability. This could be very different to the representative APR and it is important you check the rate you are being offered.

On application to the company, the personal APR he is offered is 8. Representative APR. Personal APR. Therefore, the difference between the two rates is:. What does AER stand for? What is AER interest? What's the difference between AER and gross interest rate? What is compound interest? How do I calculate AER? How do I work out how much I'll earn from a savings account? Should I check how interest is advertised?

What does AER variable mean? How often is interest compounded? Interested in saving? Get started. Learn more about fixed rate bonds. View variable rate notice accounts.

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AER Formula. How to Calculate the AER. AER vs. Stated Interest. AER Pros and Cons. Special Considerations. Key Takeaways The annual equivalent rate AER is the actual interest rate an investment, loan, or savings account will yield after accounting for compounding. The AER will be higher than the stated or nominal rate if there is more than one compounding period a year. Cons of AER Investors must do the work of calculating AER themselves AER doesn't take into account fees that may be incurred from the investment Compounding has limitations, with the maximum possible rate being continuous compounding.

What Is a Nominal Interest Rate? What Is a Real Interest Rate? Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

Related Terms What the Effective Annual Interest Rate Tells Us The effective annual interest rate is the real return on an investment, accounting for the effect of compounding over a given period of time.

What Is Discrete Compounding? Discrete compounding refers to the method by which interest is calculated and added to the principal at certain set points in time. Annual Percentage Yield APY The annual percentage yield APY is the effective rate of return on an investment for one year taking into account the effect of compounding interest. Interest Rate The interest rate is the amount lenders charge borrowers and is a percentage of the principal.

It is also the amount earned from deposit accounts. Partner Links. Related Articles. Bonds How to Give Bonds as a Gift.