Flat vs effective interest
Flat: instalment = (principal + principal × rate × years) ÷ months. Common for vehicle leasing.
Effective (annuity): interest is charged on the remaining balance. Common for bank mortgages and personal loans.
A 6% flat rate is roughly an 11% effective rate per year, so always compare like with like.
Frequently asked questions
Which is cheaper, flat or effective?
At the same headline rate, effective interest is cheaper because it is charged on the remaining balance.
Results are simulations to help planning and may differ from official calculations by agencies, employers or banks. Last updated 2026-11-02.