Difference between a Flat Interest Rate and a Reducing Interest Rate

1.Flat Rate

 Interest is charged on the full loan amount throughout the tenure.

2.Reducing Rate

Interest is charged only on the outstanding loan balance.

3.Flat Rate

EMI remains higher compared to reducing balance loans.

 4.Reducing Rate

EMI reduces as principal decreases.

5.Flat Rate

Appears lower but costs more overall.

6.Reducing Rate

More transparent and borrower-friendly.