Flat rate2/20/2024 ![]() Tan will end up paying RM25,000 interest costs for the whole 5-year tenure. The interest charged for every year during the loan tenure will always be 5% of the original loan amount (i.e RM100,000 in this case) even after he may have paid RM50,000 installment for the loan. Tan gets the loan from Bank A, his monthly installment will be RM2,083 per month for 5 years. Total loan repayment amount at the end of tenure = RM100,000+RM25,000īased on the calculation above, if Mr. Total interest cost at the end of tenure = RM100,000× 5% × 5Ģ. The calculation for the monthly payment for Mr. Tan wishes to apply for a loan from Bank A for RM 100,000 with 5 years of tenure. Let us apply this formula in a situation to see how it works. Monthly payment = Total loan repayment amount / tenure in months Total loan repayment amount at the end of tenure = P + interest chargedģ. Total interest cost at the end of tenure = P × r × tĢ. ![]() ![]() With flat rate, interest payments are calculated based on the original loan principal. Both flat rate and effective rate are methods used by lenders in calculating the interest and installment for financing.įlat rate is commonly used for personal loans and hire purchase financing (such as car or motorcycle loans) and is an accessible approach to measure interest. ![]()
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