Installment Sale Interest & Effective Rate – Tutorial

Summary

When making installment sales, use this tool to answer "How much interest is added? What is my effective rate?" With this tool you can: - Find the **total interest difference** based on the cash price and installment plan. - Calculate the **effective interest rate (per period and annual)** relative to the cash price. - See the total amount payable by the customer and the average maturity period. Core logic: - Cash price = the cash/single-payment value of the good or service. - Installment plan: equal installments paid each month/year. - Interest difference = (Total installment amount − cash price). - Effective interest rate is the rate at which the present value of installments equals the cash price (internal rate of return logic). Note: Results are calculated approximately assuming equal installments and regular payment periods. Actual contract terms and tax effects may vary.