What is a flat rate loan?
A flat rate charges interest on the full loan amount for the whole term, even as you repay it.
Reducing balance loans charge interest only on what you still owe, so the same quoted percentage costs much less. Flat rates are common for leases and vehicle loans. A flat rate of 12% over five years costs about the same as a reducing balance rate of around 20%, so always compare them on the same basis.
General information only, not financial advice.