Flat Rate

A flat rate applies interest to the original loan amount for the entire term, rather than to the reducing outstanding balance.

Flat rates are common on car and personal loans and look lower than they effectively are: the real annual cost of a flat rate is roughly almost double the quoted rate. Most UAE mortgages use reducing rates instead, so comparing products means comparing like with like.

A 5% flat rate on a loan costs substantially more over the same term than a 5% reducing rate, because interest keeps applying to the full original amount.