Convert a flat‑rate quote to a true APR
Brokers and dealers sometimes quote a "flat rate" which is calculated on the original balance every month. The equivalent reducing‑balance APR is usually substantially higher. Enter the flat‑rate quote to see the true cost.
Result
Why this matters
A flat rate calculates interest on the original balance every month, even as you pay the principal down. So even though you're paying back the loan, the interest "charge" doesn't reduce. The reducing‑balance APR is what banks actually use to price most modern lending; it's the apples‑to‑apples basis.
For Australian business asset finance, comparison rates aren't mandatory the way they are for consumer credit, so flat‑rate quotes still appear — particularly via brokers and dealer‑arranged finance. Always ask for the equivalent APR or comparison rate including mandatory fees before comparing offers.
Rule of thumb
- Over a 5‑year term, a flat rate of x% often equates to roughly 1.8x — 1.9x % on a reducing‑balance APR basis.
- Over a 3‑year term, the multiplier is closer to 1.85x — 1.95x.
- The longer the term, the bigger the gap between flat and APR.
This rule of thumb is rough — use the calculator above for accuracy.
How this calculator works
- From the flat rate, term and principal, calculate the monthly repayment:
M = P · (1 + r_flat · T) / (12 · T) - Solve numerically for the reducing‑balance APR (r) that produces the same monthly repayment:
M = P · (r/12) / (1 − (1 + r/12)−12T) - The calculator uses a bisection search to find r to within 0.0001%.
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Get comparable quotes side-by-side
If you've been quoted a flat rate, you've already done the hard part by converting it. The next step is comparing multiple genuine reducing-balance offers. We can introduce you to an accredited broker who'll source comparable quotes.