FLAT AND REDUCING ROI

 

🔹 Flat Rate of Interest (Flat ROI)

Interest is calculated on the full loan amount for the entire tenure

EMI remains constant, but interest does not reduce

Total interest paid is higher

👉 Example:

Loan ₹1,00,000 @ 10% for 2 years

Interest is charged on full ₹1,00,000 for entire period

🔹 Reducing Rate of Interest (Reducing ROI)

Interest is calculated on the remaining loan balance

With each EMI, interest decreases

Total interest paid is lower

👉 Example:

Loan ₹1,00,000 @ 10%

After repayment, interest applies on ₹80,000 → ₹60,000 → and so on

👉 Reducing ROI is always more beneficial as interest is charged only on the outstanding amount.