What is the difference between flat and reducing interest rates?
A flat rate calculates interest on the original principal throughout the stated term, while a reducing-balance rate calculates interest on the outstanding balance as it.
A flat rate calculates interest on the original principal throughout the stated term, while a reducing-balance rate calculates interest on the outstanding balance as it falls. The same advertised percentage can therefore produce very different repayment amounts. Ask for the annual percentage rate or equivalent disclosure used in your jurisdiction and a complete repayment schedule; labels and disclosure requirements differ across countries and lenders.