What it means
Interest charged on the full original loan amount for the whole tenure, even as you repay it. It looks lower but costs more than the same reducing rate.
Loans
Flat Rate
Interest charged on the full original loan amount for the whole tenure, even as you repay it. It looks lower but costs more than the same reducing rate.
CategoryLoans
Pro tip inside1 quick win
What “Flat Rate” really means
The meaning, how it works in the UAE, and why it matters to your money.
How it works in the UAE
Many UAE car and personal loan offers are quoted as a flat rate. The interest is worked out on the full amount you borrowed and spread evenly across every EMI, even though your balance falls each month.
Why it matters
Because a flat rate never shrinks with your balance, it costs much more than the same number as a reducing rate. Comparing a flat quote with a reducing quote directly can make the more expensive offer look cheaper.
EXAMPLE
3% flat over 4 years costs about the same as 5.6% reducing.
PRO TIPAsk every lender for the reducing-rate equivalent or APR before you compare offers.
Test yourself
Which of these best describes Flat Rate? Tap an answer.
Read more about Flat Rate
Guides that use this term — and a tool to put it into practice.
