Can i run my excel calculations by you?

MarkyMarkD

No, you're confused again.

The APR on the situation I described IS 5%. And, if the interest is paid in a lump at the end of the year, so is the flat rate.

Robert_Sterling_3

The rate charged on the loan is 5%.
The 5% is charged because that is the rate to be charged on the loan.
For comparison purposes , given sufifcient information, we can calculate an APR.
This APR is used for comparison purposes only.
It is never the rate charged on the loan.
In some circumstances it is equal to the rate charged on the loan. But even in such cases the rate charged on the loan is the rate charged on the loan.
The APR is for comparison purposes only.

A much over simplified example ( not the real McCoy )

Person A borrows £1000 for 1 year at 5%
The rate charged on the loan is 5%
But the person has to pay an arrangement charge of £50 on day 1.
Clearly the effect of this is he only gets £950 on day one.
But his payments are still calculated as if he borrowed £1000 at 5% Interest £50
When calculating the APR ( and it is really much more complicated than this ) it is as if he borrowed only £950 and paid £50 interest. This would give an APR of 5.263%.
But the rate charged on the loan is still 5%

In a similar case where there was no arrangement fee tha APR might come out to be 5%.

Looking at the two APRs you could see which was in fact the best loan.
That is what APRs are all about.
They are used for comparison purposes only.
They are never used as the rate charged on the loan.
But they may sometimes be equal to the rate charged on the loan.