Save Yourself from the Flat Rate Bouncers

I have come across people who have got this wrong notion that Flat Rate of interest are good. But do you know what, with Flat Rate of Interest you might be ending up paying more than you might be believing. Hence always be careful as per how much interest you are paying and always make a comparison with the reducing ROI so as to be on the safer side.

Let us understand this better through an example which my client recently shared with me:

Principal Amount: Rs. 1 Lakh
ROI: 11% (which is quite low as compared to 13-16% ROI for Personal Loan)
EMI: Rs. 3,700/-
Duration of loan repayment: 3 years
Total Amount Paid: Rs. 1, 33,200

So from the above mentioned figures clearly Rs. 33,200 (Rs. 1, 33,200 - Rs. 1,00,000) is the interest that is being paid for the total amount whereas @ 11% ROI Rs. 11,000/- had to paid.

Hence, I would always advice to go for reducing ROI. It is always better and you do not end up paying more even as ROI is always calculate on reducing Principal Amount.