Know How You Can Choose the Better Option between Flat Interest Rate or Reducing Balance Rate5/31/2021 Personal loans attract a higher rate of interest owing to their unsecured nature. It is why the loan borrowers want to pay lower interest charges and save on repayments.
Personal loans are either offered at a flat rate or the reducing balance interest rate. On that note, let’s check if the fixed rate or the reducing balance interest rate is the best option. Read on! What is a fixed personal loan rate? In a case of a fixed or flat personal loan rate, the interest amount gets calculated on the entire amount. It is also known as the principal amount. Hence, the interest amount remains fixed for the entire loan duration until you have paid it fully. This type of interest rate is good for someone who is availing of the loan for a small duration. Traditional personal loans are generally offered at the same rate. What is the reducing balance interest rate? The reducing balance interest rate or the diminishing rate is based on the outstanding loan money after periodic repayments. It is the preferred interest rate on personal loan methods compared to the flat rate. It is a popular option as a borrower needs to pay a smaller interest charge with the progression of the loan tenor. It is majorly because the interest is computed on the outstanding principal loan figure. Under the reducing balance interest rate method, the interest continues to diminish after the payment of each EMI. It is because the outstanding balance goes less than the earlier month. Based on your needs and repayment style, you can opt for the personal loan on either fixed or reducing balance interest rate. Bajaj Finserv offers pre-approved personal loans offers and even housing loans and more. It is to simplify the processing of the loan. You can check out your pre-approved loan offers today after sharing your basic details such as your name and mobile number.
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AuthorAman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management. |