The effective rate is higher than the flat quote because the balance declines over time.
Finance calculator
Car Loan Flat vs Effective Rate Calculator
Translate a flat annual rate into an approximate effective rate so the financing cost is easier to compare.
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No account. Formula and assumptions are shown below.
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Formula & disclaimer
Flat Interest = Amount Financed Γ Flat Rate Γ Years; Effective Rate is solved from the monthly cash flows
View assumptionsFormula reviewCalcs at Hand Editorial TeamVerified 26 August 2026 Β· automated checks included
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How to read this result
Three useful checks, kept deliberately short.
A RM90,000 amount financed at 3% flat for seven years: Calculate total flat interest Β· Divide total repayment into monthly instalments Β· Solve the reducing-balance rate with the same cash flows.
The effective rate is an approximate cash-flow comparison. Contracts may use statutory methods, fees and timing rules not entered here.
Formula and assumptions
Flat Interest = Amount Financed Γ Flat Rate Γ Years; Effective Rate is solved from the monthly cash flowsThe effective rate is an approximate cash-flow comparison. Contracts may use statutory methods, fees and timing rules not entered here.
Keep in mind: This comparison excludes fees, rebates, insurance and contract-specific settlement calculations.
Produced byCalcs at Hand Editorial Team
Last formula check26 August 2026
Review methodKnown examples + boundary cases
Editorial and correction policy β