Banks in the gulf region give a flat rate of interest which works to around 3.5-5% interest. If you calculate the EMI (equal monthly instalments) by reducing balance method, the actual rate of interest works out to 8% - 10%. Nobody is aware of it.
The demerit of this method is that the initial instalments go towards only the interest amount of the loan and not the capital. People realize this when they have to sell of their cars here within a year and their balance on loan is still their INITIAL CAPITAL amount and all their instalments paid were used towards reducing the Interest component.Thats when they complain to the bank who have clearly written all this in the agreement.(albeit in fine print).
Banks in the gulf region give a flat rate of interest which works to around 3.5-5% interest. If you calculate the EMI (equal monthly instalments) by reducing balance method, the actual rate of interest works out to 8% - 10%. Nobody is aware of it.
The demerit of this method is that the initial instalments go towards only the interest amount of the loan and not the capital. People realize this when they have to sell of their cars here within a year and their balance on loan is still their INITIAL CAPITAL amount and all their instalments paid were used towards reducing the Interest component.Thats when they complain to the bank who have clearly written all this in the agreement.(albeit in fine print).
All i can say is learn from other's mistakes