Difference Between Flat Interest Rate And Reducing Balance Interest Rate: What You Need To Know | Paisa Live

If you’re considering taking a personal loan, it's essential to understand the difference between Flat Interest Rate and Reducing Balance Interest Rate to avoid potential issues. A personal loan, often referred to as an emergency loan, is an unsecured loan with minimal paperwork. However, banks charge significant interest on this loan. There are two main methods of interest calculation: Flat Interest Rate and Reducing Balance Interest Rate. The choice between these can significantly affect the cost of your loan. The Flat Interest Rate method calculates interest on the full principal amount throughout the loan term, while the Reducing Balance method calculates interest on the outstanding balance, making it generally cheaper over time. For complete details, watch the full video.