APR and monthly flat rate
實際年利率與月平息
A monthly flat rate charges interest on the original loan amount every month, even after part of the principal has been repaid. APR (annual percentage rate) turns interest and fees into a yearly rate and allows for the balance falling as you repay, so it is usually much higher than the flat rate multiplied by twelve. To compare what loans cost, APR is the more reliable figure; the flat rate only explains how one loan's interest is worked out.
Example
Suppose you borrow HK$100,000 over 12 months at a monthly flat rate of 0.5%, with no other fees.
- Loan amount
- HK$100,000
- Term
- 12 months
- Total interest
- HK$6,000 (100,000 × 0.5% × 12)
- Monthly repayment
- about HK$8,833
- Flat rate × 12
- 6%
- APR
- about 11%
For the same loan, the flat rate times twelve is 6% but the APR is about 11%.
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