Question

What does it mean by flat rate interest?

Answer 1

A flat rate interest is a type of interest charged on a loan or credit that is calculated based on the original principal amount of the loan for the entire term. This means that the interest is charged on the original amount borrowed and does not decrease as the loan is repaid. This is in contrast to compound interest, where the interest is calculated on the remaining balance of the loan, resulting in decreasing interest payments over time. Flat rate interest is typically simpler to calculate and understand, but can be more expensive in the long run compared to compound interest.