Personal loan is also called emergency loan. Although there are many ways to raise money in emergency nowadays, but still personal loan is very helpful on every occasion. Personal loan is an unsafe loan that does not require much trouble. But in lieu of this loan, banks charge more interest from the customer. Most people know that personal loans are expensive.
Interest on this loan is charged in two ways, flat interest rate and decreasing remaining interest rate. If you do not know the difference between an uniform interest rate and decreasing balance, then you may misunderstand the personal loan deal and lose yourself in the cheap personal debt cycle.
The name of the Reduction Balance Interest Rate shows that the customer will have to pay interest only on the outstanding loan amount. This means that every month the interest payable is calculated on the basis of outstanding loans, not on the basis of real loan. For example, if you have taken a loan of Rs 5 lakh at the rate of 16 per cent for five years, as the months pass, EMI will also start decreasing.
