1. What is Flat Rate Payment?

Flat rate payment is a method where the total interest is calculated on the original principal amount for the entire loan term, and the total amount (principal + interest) is divided equally across all payment periods.

2. How Does the Calculator Work?

The calculator uses the flat rate payment equation:

Where:

• \( P \) — Principal loan amount (USD)
• \( Interest \) — Total interest amount (USD)
• \( n \) — Number of payment periods

Explanation: The equation calculates equal payments by spreading both principal and interest equally across all periods.

3. Difference Between Flat and Reducing Rate

Details: In flat rate, interest is calculated on the original principal throughout the loan term. In reducing balance method, interest is calculated on the outstanding principal, resulting in decreasing interest payments over time.

4. Using the Calculator

Tips: Enter the principal amount in USD, total interest in USD, and number of payment periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: When is flat rate payment typically used?
A: Flat rate is commonly used for short-term loans, personal loans, and in some car loans, especially in certain regions.

Q2: Which is better - flat rate or reducing rate?
A: Reducing rate is generally better for borrowers as it results in less total interest paid, especially for longer-term loans.

Q3: How do I calculate total interest for flat rate?
A: Total interest = Principal × Annual Interest Rate × Loan Term in years.

Q4: Does flat rate payment change over time?
A: No, flat rate payments remain constant throughout the loan term.

Q5: Can I calculate reducing rate payments with this calculator?
A: No, this calculator only computes flat rate payments. A separate calculator would be needed for reducing rate calculations.