Compare flat rate vs reducing balance EMI side by side. A flat rate of 7% is equivalent to a reducing rate of ~12.5%! See the real cost of your loan and how much you can save.
Flat rate calculates interest on the original loan amount throughout the tenure. Reducing rate calculates interest only on the outstanding balance, which decreases with each EMI payment. A flat rate of 7% is approximately equal to a reducing rate of 12.5-13%. Always compare loans on reducing rate basis.
Flat rate charges interest on the full loan amount for the entire tenure. Reducing rate charges interest only on the remaining balance. Flat 7% ≈ Reducing 12.5%.
Reducing rate is always cheaper because you pay interest only on outstanding balance. A flat rate of 7% costs the same as a reducing rate of ~12.5%.