1. What is Flat Rate Interest?

Flat rate interest is a method of calculating interest where the interest is charged on the original principal amount throughout the loan term, regardless of the repayment amount already paid.

2. How Does the Calculator Work?

The calculator uses the flat rate interest formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time in years
• PMT — Monthly payment (USD)

Explanation: The total interest is calculated upfront based on the original principal, then divided into equal monthly payments.

3. Importance of Loan Calculation

Details: Understanding your total repayment amount and monthly payments helps in budgeting and comparing different loan options for debt consolidation.

4. Using the Calculator

Tips: Enter principal in USD, interest rate as decimal (e.g., 0.05 for 5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is flat rate different from reducing balance?
A: Flat rate charges interest on the original principal throughout, while reducing balance charges interest only on the remaining principal.

Q2: Is flat rate better than reducing balance?
A: Flat rate typically results in higher total interest payments compared to reducing balance for the same nominal rate.

Q3: What's a typical interest rate for credit card consolidation?
A: Rates vary but typically range from 5% to 20% annually depending on credit score and lender.

Q4: Are there fees not included in this calculation?
A: Yes, some loans may have origination fees, late fees, or other charges not reflected in this simple calculation.

Q5: How accurate is this calculator?
A: This provides an estimate based on flat rate interest. Actual loan terms may vary based on lender policies.