What it means
Interest charged only on the balance you still owe. As you repay, the interest part of each EMI shrinks.
Loans
Reducing Rate
Interest charged only on the balance you still owe. As you repay, the interest part of each EMI shrinks.
CategoryLoans
Pro tip inside1 quick win
What “Reducing Rate” really means
The meaning, how it works in the UAE, and why it matters to your money.
How it works in the UAE
With a reducing rate, the bank charges interest only on the balance you still owe. Early EMIs are mostly interest; later ones are mostly principal. Most UAE mortgages and many personal loans are priced this way.
Why it matters
It is the fairest way to compare loans, because it reflects what borrowing really costs you each month.
PRO TIPUse the reducing rate (or APR) as your common yardstick for every offer.
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Read more about Reducing Rate
Guides that use this term — and a tool to put it into practice.
