"A general rule known by financial managers is that when flat interest is used, the APR is almost twice as much as the quoted interest rate." For this reason, as mentioned above, the true rate of interest is nearly double. Since $100 in principal is being paid each month, the average amount to which the borrower has access during the loan term is approximately half, in fact just over $600. However, the borrower only has access to $1,200 at the very beginning of the loan. For example, a loan of $1,200 can be structured with 12 monthly repayments of $100, plus interest, due on the same dates, of 1% ($12) a month, resulting in a total monthly payment of $112. One reason for the popularity of flat rates is their ease of use. More recently, they have also come to be used in the informal economy of developing countries, frequently adopted by microcredit institutions. Loans with interest quoted using a flat rate originated before currency was invented and continued to feature regularly up to and beyond the 20th century within developed countries. By Brett epic (talk) - I created this work entirely by myself., CC BY-SA 3.0,
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