Flat rate of interest VS reduced interest rate personal loan

It is quite essential to confirm about the rate of interest before taking the personal loan. You should always go for the loan with lowest rate of interest. Always make sure that rate of interest is of your caliber or not to avoid and odd situation further during repaying the loan amount. This is why loan with lowest rate of interest would be beneficial for you.

Now the question is that which one is better between flat rate of interest and reduced interest rate personal loans. Here is the description about both.

Flat rate of interest

In flat rate interest method the interest is charged on the complete original amount completely during the loan period. For instance you took the loan of Rs.10000 and the flat rate of interest is 4% per month with payment period of 4 months. In the first month the amount of interest would be Rs. 400 and this amount would be the same i.e. Rs. 400 throughout the loan period. This method puts additional burden on the people who are willing to take the personal loan. This method enhances the amount to pay as personal loan interest rate rather than the declining balance interest rate.

Reduced interest rate

This method is more beneficial for the people who are about to take a personal loan or have taken it already. In this method you just need to pay on the remaining balance, and not on the principal amount. This method should be used because it allows the borrowers to pay for such amount which is left with them.

Reduced interest rate method is more precise than the flat rate of interest method. Borrowers can compare the rates easily if all the institutions use the same method for calculation. People would like the application reduced rate of interest method by all means. Because everyone wish to pay the right amount as personal loan interest rate and reduced rate of interest method would definitely get fit for the purpose.

Most of the institutions all across the globe use the flat rate interest method because it helps in generating huge profits. But this method put additional burden on the shoulders of borrowers. This is why reduced rate of interest method is the urge of time and people. This would also encourage more people to take loan. It is up to you what you would choose. Before taking the loan always check the interest to become a wise borrower. It is a proven fact that reduced interest rate is far better than the flat rate method. But flat rate method is used by most of the institutions all across the sphere.

If you have any emergency then you can take the personal loan because you have to pay high rate of interest on it. Always ask for the floating interest rate, because it will become immensely beneficial for you. If you are unable to make up your mind then you also take the suggestions from experts as well.

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5 Responses

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