Robert McLister·General·December 18, 2012Effective Rate The term “effective rate” is used in two ways. It can refer to: The actual rate that the borrower must pay on a loan after the effects of compounding are considered (This makes it different from the nominal interest rate.), and/or The rate that reflects the borrower’s actual borrowing cost, after accounting for any cash back that is received. Partial source: CAAMP Like news like this?Join our CMT Updates list and get the latest news as it happens. Unsubscribe anytime. SUBSCRIBE! Thank you for subscribing. One more step: Please confirm your subscription via the email sent to you.