Flat rate vs reducing balance loan calculation
KiraBoss Editorial· Last reviewed 2026-01-01· 1 min read
Two methods dominate Malaysian lending:
- Flat rate is common for hire purchase. Interest = Loan × Rate × Years.
- Reducing balance is used for most personal loans and mortgages — interest is charged on the outstanding balance each month.
For the same nominal rate, reducing balance costs less total interest. Compare both in the Personal Loan Calculator.
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