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The stated interest rate is exactly that. If you are approved for a loan of $XXXXXX.XX at 12%, then 12% is the stated interest rate. The effective rate is the stated rate divided by how many times it will be compounded over the year, so a simple way to explain is if the interest on your loan for $XXXXXX.XX at 12% is compounded quarterly (every 3 months), then your effective interest rate would be 4%.
This might not be entirely accurate, but I am almost positive that it is. I am taking an Accounting final tomorrow where this stuff is a major portion of the test, and have been going over it for quite some time now.
Hope this helps!
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