EIR
Effective Interest Rate
Short definition
The effective interest rate is the IRR of the loan cash flows (draws, fees, interest, principal). It sits above coupon or reference+margin because upfront fees and compensating balances cut net cash.
Detailed explanation
IFRS 9 effective-interest accounting pushes P&L interest toward this rate. Upfront fees, compensating deposits and recurring commissions lift EIR above coupon. Prepayment recomputes EIR on the realised tenor.
Compounding frequency (monthly vs quarterly) splits nominal all-in from EIR. Compare on the same compounding base.
Why it matters for the CFO
Term-sheet ranking and Kd should use this rate. “Margin 500 bp” can be EIR 700 bp.
How it is calculated
EIR: nakdi çekim ve geri ödeme takviminin IRR’si (ücretler dahil)
Variables in the formula
- EIR: IRR of the loan cash flows
How to read it
EIR − headline coupon is the fee and balance take. A large gap means the upfront fee is heavy relative to tenor.
Numerical example
Draw 100 mn TL, 1 mn TL upfront, 3-year 40% interest, principal at maturity: net draw 99 mn TL, EIR sits above the coupon (about 40.7% on a simple view; true IRR follows the cash calendar).
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Definitions are educational. They are not investment, credit or tax advice.