[ca-dreaming]

The APR as the name suggests is the ANNUAL PERCENTAGE RATE. The difference between the APR and Fixed rate method is that in FIXED MODE even if you are paying the principal they are charging you interest on the whole amount for the full term of the loan. Wheras in the APR mode as you make payments they will only calculate the interest based on how much more you owe.

APR
So let us say that the APR is 12% for a 100K loan over 6 months (For simplicity). That means that the monthly rate is 1% (12%/12). So in the first month you will pay interest of $1000 because 1% times $100000 = $1000. The principal works to $17255. This means that now you only have $83745 left. The next month interest is calculated based on this new amt so the interest will only be $837 or 1% of what is left. Here is what the rest of the payments look like:

Payment ($) 17255 17255 17255 17255 17255 17255
Principal Paid ($) 16255 16417 16582 16747 16915 17084
Interest Paid ($) 1000 837 673 507 340 171
Total Interest ($) 1000 1837 2511 3018 3358 3529
Balance ($) 83745 67328 50746 33999 17084 0

In FIXED mode you are paying inrest of 1% of the original loan amount of $100,000 so you will pay more in interest. (DAMN!!).