Question 1

What is the difference between fixed-rate and declining-balance interest?

Accepted Answer

Fixed-rate (flat) interest charges the same interest amount each month on the original principal. Declining-balance (reducing) interest recalculates each month based on the remaining balance, resulting in lower interest over time.

Question 2

How do I calculate my monthly loan payment?

Accepted Answer

For fixed-rate loans: Monthly Payment = P × r × (1+r)^n / [(1+r)^n - 1]. Enter your loan amount, interest rate, and term into the calculator above for instant results.

Question 3

Which loan type costs less overall?

Accepted Answer

Declining-balance loans typically cost less in total interest because interest is calculated on the remaining balance, which decreases with each payment. Flat-rate loans may appear cheaper due to lower monthly payments but often cost more overall.