What APR and flat rates really mean.
An APR counts fees as interest; a flat rate charges interest on the whole loan for the whole term. Both turned into one comparable yearly rate.
By Suraj Kumar3 min read
Two loans at the same quoted rate can cost very different amounts. Here is why.
APR.
Fees paid at the start mean you receive less than you repay on. The APR is the yearly rate at which the payments are worth what you actually received, worked out by the actuarial method of US Regulation Z; India's Key Facts Statement works its APR the same way.
Flat rates.
A flat rate charges interest on the original amount for the whole term. 10% flat over three years costs the same as about 17.92% on a reducing balance, the way banks quote.
Comparing offers.
Turn every offer into its APR and compare those; the page says it is arithmetic on what you typed, and your lender's APR is theirs.
Further reading
Topics: apr calculator · flat rate vs reducing rate · annual percentage rate · effective interest rate · loan apr
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