01Why the two rates look so different
A flat rate charges interest on the full amount you borrowed for the whole tenure, even though you repay part of it every month. A reducing rate only charges interest on what you still owe, so each month the interest part shrinks.
02The quick conversion
Over a 4 to 5-year loan, a flat rate roughly works out to a little under double as a reducing rate. A 3% flat rate over 48 months is about 5.6% reducing — so a 5% reducing offer would actually be cheaper.
Flat rates look lower but cost more than the same reducing rate.KEY POINT
03What to ask the bank
Ask for the reducing-rate equivalent or the APR, and ask for the Key Facts Statement. UAE banks must give you one, and it shows the rate, fees and total cost in one place.
04Compare total cost, not just EMI
Two offers can have similar monthly payments but very different totals once fees and tenure are included. Put both into a calculator and compare the total you repay.
