The EMIs of a personal loan with a flat interest rate (fixed interest rate) will remain the same until the end. On the other hand, EMIs of a personal loan with a reducing balance rate (floating interest rates) will decrease with the amount. To understand better let’s know more about fixed interest rates and floating interest rates.
What is a flat interest rate and how does it work?
Flat interest rate is also known as fixed interest rate, is applied to the total amount of the loan and it remains the same throughout its tenure. However, the principal amount of the loan decreases after every EMI paid, the interest remains the same which results in a rapidly increasing interest rate with every EMI paid.
What is a reducing interest rate and how does it work?
Reducing interest rate also known as the floating interest rate is calculated every month on the principal amount remaining after an EMI is paid to Money Lender Singapore. This method calculates interest every month only for outstanding amount which means, with every EMI paid the principal amount goes down and so does the interest rate. So, you would pay less interest with a floating interest rate as compared to a flat interest rate.
Which one is better, flat interest rate or floating interest rate?
Well, as now you know the difference between the flat interest rate and the floating interest rate you can choose the better one easily. It is quite common for people to get fooled by employees or agents because of poor knowledge. But now you can ask them which method they are using, the fixed interest rate method or the floating interest rate method. You can also check the true cost of a loan by converting everything into the effective interest rate equivalent.
Where should you apply for a personal loan?
To fulfill consumer’s desires bank and NBFCs offer different types of loans, such as home loans, vehicle loans, personal loans, education loans, gold loan and loans against property. However, applying for a loan is not that tough but understanding the different aspects of the process and how things work is an entirely different concept. The employees or agents will always try to fool you by telling you only about the good stuff. They don’t tell you about the proper details and process. You can search on Google for money lenders by typing Fast Loan Singapore and Money Lender Singapore in the search bar but it can be dangerous to apply without any knowledge. To avoid getting yourself into a trap, apply at Crawfort. They are the best money lenders in Singapore with fast loan service.