When the declining-balance method of calculating interest on installment loans is used,the simple rate of interest and the APR will differ only if fees boost the finance charge.

Question

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The declining-balance method uses a constant rate of interest applied to the remaining balance of the loan, resulting in a finance charge that decreases over time. If there are no additional fees or charges, the simple rate of interest and the APR will be the same. However, if there are fees added to the loan amount, the APR will be higher than the simple rate of interest due to the inclusion of those fees in the calculation.

When the Declining-Balance Method of Calculating Interest on Installment Loans