Why Flat Rate is More Expensive
Flat Rate: Interest calculated on the original principal throughout tenure. EMI = (Principal + Total Interest) / Months. Reducing Rate: Interest only on outstanding balance, which decreases each month. A flat rate of 10% p.a. for 24 months ≈ 18.5% reducing rate — almost double!
Always compare loans on APR (Annual Percentage Rate) or reducing balance basis.
⚠️ Disclaimer: For comparison purposes. Actual terms vary by lender. Source: RBI.