Common Misconceptions about Loans
Some people think that they are not eligible to apply for a loan with credit card debt or an existing loan, but that...
Do not disclose your password to anyone (including Promise staff and the police). Our Company does not directly promote loan products to individuals, require customers to repay loans or request personal information through WhatsApp, WeChat or Facebook. Please click here to know the details.
The interest rate is always the most important factor to consider when applying for a loan. The higher the interest rate, the higher the cost of borrowing money. Therefore, before deciding on applying for a personal loan, you must clearly understand how the loan product you have chosen calculates interest and annual percentage rate (APR). Of course, you also need to consider the loan amount, repayment period and total loan interest payable, etc., and make sure there are no hidden costs or other potential borrowing interest charges. There are many ways to calculate interests, like monthly flat rate, annual percentage rate, etc… Do you understand what the differences are? This article will show you the differences between monthly flat rate and annual percentage rate.
Generally, many personal loan companies use a 'monthly flat rate' to calculate the monthly repayment amount and loan interest. The monthly flat rate is usually only a few tenths of a percentage. At first glance, it may seem that the numbers are relatively small. Using a monthly flat rate for promotional purposes can help loan companies create a "low interest rate" effect which is good for publicity. Besides, you may calculate the total monthly repayment amount easily by using monthly flat rate, as it is assumed that the repayment amount of loan principal and interest in each month are the same. Below monthly flat rate example is for your reference:
Loan amount: $100,000
Repayment period: 12 months
Monthly flat rate: 0.5%
Monthly average interest = Loan amount x Monthly flat rate
$100,000 x 0.5% = $500
Total interest repayment = Monthly average interest x Repayment period
$500 x 12 = $6,000
However, the loan interest rate is not merely calculated by simply multiplying the monthly flat rate by 12 months (0.5% x 12). So, even if the monthly flat rate seems to be very low, it may not be as low as it looks after it has been converted into loan interest.
If you want to know about the total cost of the personal loan products you have chosen, you should actually look at the "APR" (annual percentage rate) instead of the monthly flat rate! The APR is a reference rate which includes not only the loan interest, but also handling fees, service fees, miscellaneous fees, repayment period, interest rebates, cash rebates, instalments and other expenses. It is more accurate than monthly flat rates, as it reflects the actual borrowing interest and costs, allowing you to understand annual expense more intuitively after you have borrowed money.
The interest of Promise's personal loans is calculated on daily basis, which means if you have used the loan for one day, only one day of interest is required if you want to settle your loan earlier, you only need to pay the loan interest for the number of days you have borrowed, instead of the one-month loan interest. In comparison, this is more cost effective. In addition, Promise's personal loan plan is flexible, with the actual annual interest rate as low as 1.12% and no additional charges for early settlement (e.g. penalty, handling fee, etc.).
Want to find out the interest and cost of loans, but find it complicated to calculate the APR yourself? Use Promise's loan calculator to calculate the repayment amount and repayment period of a personal loan for your reference, and see the cost of your loan clearly at a glance. Borrowing money is just that secure, without any hesitation!
