The best way to calculate the total interest on a fixed-rate loan is to find out the APR. The APR is the annual percentage rate, and it’s the total cost of borrowing over the course of one year including all interest and additional fees. No matter what type of loan you choose, always review the APR.
APR is the best way to determine how much that loan is actually going to cost you. Not only does it take into account the interest rate, but it also includes any additional fees like origination fees, service fees, processing fees, and more. Simply looking at only the interest rate isn’t the most accurate way to find out how much you’ll pay over the life of the loan.
This applies to fixed-rate loans as well as variable-rate loans. A fixed-rate loan is one where the interest rate stays the same throughout the entire repayment period. Whereas, variable-rate means that the interest rate may go up or down based on the overall rates set by the banks and the government. They both have their pros and cons.
A fixed-rate loan can be beneficial if you’re looking for a stable payment that won’t change. You won’t have to worry about your payment increasing with a fixed-rate loan. Variable interest rates may go up at times, but you could save money if they’re low. Which one you choose will depend on your specific financial situation.
Both fixed-rate and variable-rate loans will have an APR. In fact, any loan you take out should have an APR. Lenders are required to disclose the APR to customers since this is the best representation of how much the loan costs.
It’s important to remember that regardless of which type of interest rate you have, making on-time payments is crucial. If you’re comfortable with the fixed rate that you’re offered and you know that you can afford the payments throughout the entire loan, then maybe that’s the best option for you. If you have a little wiggle room and can afford to run the risk of the rate increasing slightly, then variable interest rates may be the way to go.