Don’t do this mistake while taking a loan.

In the example the tenure is considered to be 10 years

Flat interest rates effectively remain higher than reducing interest rates, and the interest rates in flat rate remain fixed during the loan’s tenure, which is determined based on the principal amount of your loan

In reducing rate, the interest rate is accrued under diminishing rate and is based on the outstanding loan amount.

Let’s break down the interest charges on a ₹40,00,000 loan at 10% interest for 10 years. In the flat rate scenario, the interest remains constant each year, totaling ₹4,00,000 annually for the first, second, and third years. However, with a reducing rate of interest, the interest decreases over time as the principal balance diminishes with each payment. In the first year, the interest is ₹4,00,000, followed by ₹3,60,000 in the second year, and ₹3,20,000 in the third year.

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