Flat Rate to EIR in Singapore: Your Questions Answered
These are the questions people ask most often about flat rate to eir. Each answer is short; follow the links for the full detail.
What does a flat rate to eir calculation tell me?
Converts an advertised flat interest rate into the equivalent effective interest rate.
What is the formula?
EIR is the rate that makes the present value of the instalments equal the loan.
What do I need to enter?
Flat rate (% a year), Term (years).
Is this financial advice?
No. It is a calculation tool. For decisions about loans or investments, compare official offer documents and consider speaking to a licensed adviser.
Can you show an example?
For example, with these inputs:
- Flat rate (% a year): 3
- Term (years): 5
the calculator returns:
- Effective interest rate: 5.64%
Any tips?
- Car loans are capped at seven years, and interest is charged on the original amount for the whole term.
- Check for early repayment penalties and processing fees before taking any loan.
- Compare loans by effective interest rate, not flat rate; the EIR is roughly double the flat rate.
Background
Compounding is the reason long-term saving works: returns earn further returns, so the growth curve steepens over time. The same maths works against you with debt, which is why credit card balances at around 27% a year grow quickly if only minimum payments are made.
Inflation erodes buying power, so a savings goal set in today's dollars needs to be adjusted upwards for the years it will take to reach it. Singapore's core inflation has varied widely over the past decade, so it is worth testing a range of rates.
An emergency fund of three to six months of essential expenses protects you from having to borrow at high rates when something unexpected happens. Once that buffer is in place, extra savings can go towards longer-term goals and investments.
Related calculations
- Split the Bill Calculator: Splits a bill evenly.
- Credit Card Payoff Calculator: Shows how long a card balance takes to clear at a fixed payment.
- Retirement Savings Calculator: Projects retirement savings outside CPF.
- Emergency Fund Calculator: Sets a target for your rainy-day savings.
Try it yourself with the Flat Rate to EIR Converter.
Run your own numbers: Flat Rate to EIR Converter