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How a flat rate works
A flat rate applies the quoted percentage to the amount you originally borrowed, every year, regardless of how much you have already repaid. Because the charge never falls as the balance does, you pay interest on money you have already handed back.
Why it roughly doubles
On a reducing-balance loan you pay interest only on what you still owe, so the effective rate is close to the quoted one. On a flat rate the effective APR is roughly double, because the balance you are "charged on" stays at the full amount.
What it means for you
Never compare a flat rate directly against a reducing-balance rate — convert both to total repayable or APR first. Read APR vs factor rate.
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Frequently asked questions
Is a 6% flat rate the same as 6% APR?
No. A 6% flat rate is closer to 11–12% APR, because the flat rate keeps charging on the full original balance while a reducing-balance rate charges only on what you still owe.
How do I convert a flat rate to APR?
As a rule of thumb, roughly double it, or ask the lender for the total repayable and the APR. Never compare a flat rate against a reducing-balance rate as quoted.
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Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.