flat interest rate


Interest charged on the loan without taking into consideration that periodic payments reduce the amount loaned. For example, an individual takes a $10,000 loan at 10% payable in 5 equal installments,. Using a flat interest rate, the interest charge would be $5,000 for the entire term. However, it does not take into consideration that after the first payment, the debt would be reduced by the amount paid, thus effectively reducing the interest expense for the whole period.

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You should try and make sure you shop around so that you can get the best possible flat interest rate.

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The flat interest rate was used to approximate the costs of the loan but it was not exact, only an approximation.

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Before accepting the offer, the bank's client weighed the differences between the loan's offered flat interest rate and a diminishing balance interest rate.

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flat fee effective interest rate