A Comparison of Flat and Reducing Personal Loan Interest Rates

 

When you borrow a personal loan, the focus should be on the rate of interest. The rate of interest is what makes the borrowing affordable or expensive. So, if you are deciding on a low rate of interest, you also need to take care of the type of interest rate. There are various types of rates of interest, like flat and reducing rates of interest. Each of them is different from the other and has perks and benefits. When you decide to opt for a personal loan online, you must understand the type of rate of interest that will suit you the best. It is important to understand the impact of the factors that will keep changing your interest rate. Research the loan providers well and get the one that offers you the lowest and the best type of rate of interest.

 

Flat rate of interest: A flat rate of interest is the most common form of interest rate. It is found very commonly when you borrow an instant personal loan from a bank or financial institution. A flat rate is a fixed rate of interest. It remains flat with no fluctuations throughout the loan term. This is because the rate of interest is not subject to change with the impact of market conditions or variation in financial ups and downs in the market. The flat rate ends at the same percentage as it started at the beginning of the loan term. This allows you to make an informed decision about your EMI and better manage your finances. When your rate of interest is fixed, your EMI will also be fixed and there will not be any need to change financial planning.

 

Reducing rate of interest: A reducing rate of interest is where the amount of monthly interest to be paid by the borrower takes into consideration the EMI repayments that have been made, so it is calculated against the remaining loan amount or outstanding balance. So, the rate of interest is not calculated every time on the actual principal amount. The rate of interest is calculated on the remaining loan amount after you have done all the EMI. The loan amount keeps decreasing every month after an EMI payment. So the rate of interest will also decrease as it will be calculated on the decreasing principal loan amount. This will help you crack a better deal as your interest keeps going down as you keep paying your EMI every month.

Read More: Understanding How Small Personal Loans Work

Finishing up

Compare personal loan interest rates now before you take out a personal loan online. If you need money on the same day, apply for an instant personal loan from Clix Capital today.