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APR vs flat rate. Early settlement depends on fees and the contract’s rebate rules.
Updated 2026-10-25 · ThinkVault Tools
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APR vs flat rate. Early settlement depends on fees and the contract’s rebate rules.
Check the purpose and assumptions, then open the tool. Return to the guide for details.
APR vs flat rate
APR vs flat rate
The annual percentage rate (APR) expresses interest and some fees as a yearly cost of borrowing, which makes loans comparable.
A flat rate charges interest on the original principal for the whole term. Even as the balance falls, interest is still based on the original amount, so a low flat rate is not equivalent to the same APR.
The two formulas
- APR mode: a fixed level payment from the monthly rate, split each month into interest and principal.
- Flat mode: total interest = principal × annual flat rate × years; payment = (principal + total interest) ÷ number of payments.
Method
APR is effective annually: monthly rate = (1 + APR/100)^(1/12) − 1, with equal month-end repayments. Flat interest = original principal × annual flat rate × years. Solve monthly cash flows for m, then APR = ((1+m)^12 − 1) × 100%. No extra fees or rebates are assumed; lender payment rounding and charges can change the APR.
Last checked: 2026-10-24
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