Asset finance
What we can proveThe conversion below is computed and unit tested. The worked example is checkable by hand and the working is published.
What we will not claimWe do not quote any lender's flat rate. Secondary sources publish figures we could not find on the lenders' own pages, so we leave them out.
One figure we did readHong Leong Finance publishes financing of up to 90% for new equipment, machinery and commercial vehicles, and up to 80% for used. Read 2026-08-18.
Source
Ask whether the rate is flat. It roughly doubles the answer.
A flat rate charges interest on the original amount for the whole tenure, even though you are paying the loan down every month. An effective rate charges only on what you still owe. The same number means two very different things, and equipment and vehicle financing is where you are most likely to meet the first kind.
Working, so you can check it rather than trust it. Interest is S$100,000 times 5% times 3 years, which is S$15,000. Add that to the principal and divide by 36 months and the instalment is S$3,194. The rate that values 36 of those instalments at S$100,000 is 9.31%.
Convert your own quote
The rule of thumb is slightly wrong
People repeat that the effective rate is "about 1.8 times" the flat rate. It is a little worse than that, and it does not simply rise with tenure the way it is often described. Computed across a 5% flat rate:
| Tenure | Real cost | Times the flat rate |
|---|---|---|
| 12 months | 9.10% | 1.821x |
| 24 months (worst) | 9.32% | 1.865x |
| 36 months | 9.31% | 1.862x |
| 48 months | 9.24% | 1.848x |
| 60 months | 9.15% | 1.831x |
At a 5% flat rate the multiple peaks at 24 months rather than climbing with tenure, running 1.82 to 1.87. Across the wider range of 1% to 10% flat rates and 12 to 72 month tenures it runs 1.7 to 1.94. Computed and unit tested in this site's own code, not taken from a rule of thumb.
The cheaper the headline, the worse the gap
This is the part that surprised us, and it is the wrong way round from what you would expect. The multiple is worse at lower flat rates.
So a quote that looks unusually cheap deserves the most scrutiny, not the least. A very low flat rate is proportionally the most misleading number on the page.
What to actually do
Ask one question before you compare two quotes: is that rate flat or effective? Comparing a flat rate against an effective one is not a close call, it is a factor of nearly two. If the answer is flat, put it through the box above before you decide anything.
We are deliberately not publishing any lender's flat rate here. Secondary sources quote specific figures we could not find on the lenders' own pages, and a rate we have not read is a rate we will not print.