Interest & APR Comparison
Flat interest rates often sound cheap but cost nearly twice as much as reducing balance rates. See the difference clearly.
📊 Calculation Results
📐 How This Calculation Works
This tool uses standard periodic compound interest and amortization algorithms. For reducing balance amortization, installments are computed using the formula:
M = P × [ r(1 + r)^n ] / [ (1 + r)^n – 1 ]
📚 Related Educational Guides
Reducing Balance Interest Explained: Why It Is the Fairest Way to Borrow
Learn how reducing balance interest charges interest strictly on your remaining unpaid debt, why your interest payment shrinks over time, and how it compares to annuity and flat interest.
Simple (Flat) Interest Explained: Formula, Math, and Hidden Risks
Understand how flat simple interest is calculated on the original loan balance, why a 5% flat rate equals nearly 9.5% effective APR, and how to avoid overpaying on consumer credit.
What Is APR? Annual Percentage Rate Explained Simply with Real Examples
Learn what Annual Percentage Rate (APR) truly represents, how it combines nominal interest with mandatory administrative fees, and why comparing APR is the only way to avoid borrowing traps.
All values are mathematical estimates for educational purposes only. Actual lender terms and fees may vary.
Educational tools only. FinWise Labs is not a lender, broker, bank, or financial advisor.