Two ways to quote interest
- Flat rate: interest is charged on the original amount for the whole term, even though you repay part of it every month.
- APR / reducing balance: interest is charged only on what you still owe, so it shrinks every month.
Worked example: 50,000 over 4 years
| Offer | Monthly | Total interest | Real APR |
|---|---|---|---|
| 4% flat | 1,208.33 | 8,000.00 | ≈ 7.47% |
| 7% APR | 1,197.31 | 7,470.99 | 7.00% |
The “4%” offer is actually more expensive than the 7% one. As a rule of thumb, a flat rate costs a little under twice its headline number in APR terms.
The formulas
- Flat: monthly = (P + P × rate × years) ÷ months.
- Amortized: monthly = P × r ÷ (1 − (1 + r)−n), with r = annual rate ÷ 12 and n = months.
Don't forget fees
Upfront admin fees raise the real cost because you receive less money but repay the same instalments. The loan calculator includes fees in the APR and shows a yearly schedule, so you can compare offers on the same basis.
Compare offers in the loan calculatorOpen the tool
Frequently asked questions
Is a flat rate always worse?
For the same headline number, yes — compare offers by APR instead.
What is a good APR?
It depends on your country and credit; compare at least two or three offers by APR and total cost.
Does Islamic murabaha financing use flat rates?
Profit is usually quoted as a fixed (flat) rate on the original amount; the calculator shows its APR equivalent for comparison.