What is the difference between 'Reducing Balance' and 'Flat Rate' of interest?
In the 'Flat Rate' system, the rate of interest on the whole amount is calculated over the entire duration of the loan and the principal, plus the interest is divided over the number of installments.
But in the 'Reducing Balance' system, also referred to as the WDV (the Written Down Value) system, the interest is charged on the outstanding balance of the loan.
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