Answer first
A flat percentage is charged against original principal, while a reducing-balance rate is charged against the remaining balance. The percentages are not interchangeable.
How to decide
For a flat-rate illustration, calculate principal × rate × years, then divide total repayment into instalments. An effective annual rate requires the timing of every cash flow and an iterative calculation.
A practical process
Use the same amount received, dates and fees. Compare total ringgit cost and compute an internal rate of return only with a reviewed tool.
Limits and next step
Rounding and fees affect the effective-rate calculation. Check the linked primary source and its captured date before making a commitment.
Malaysian worked example
Show the working
Inputs
- RM20,000
- 5% flat
- 5 years
Calculation
- flat interest = RM5,000
- monthly = RM25,000 ÷ 60 = RM416.67
Illustrative resultThe quoted 5% flat rate produces RM5,000 interest; it is not equivalent to 5% on a reducing balance.
Rounding and fees affect the effective-rate calculation.
Sources
- Source checked on 2026-09-14MaybankUpdate required
Hire Purchase/-i and reducing-balance framework
- Effective
- 2026-08-01
- Source checked on 2026-09-14Bank RakyatUpdate required
Personal Financing-i Floating Rate Product Disclosure Sheet — Version PF Floating 01
- Source checked on 2026-09-14Bank Negara Malaysia
- Source checked on 2026-09-14Bank Negara Malaysia
- Source checked on 2026-09-14Bank Negara Malaysia
Update required means this source has passed its internal freshness window. Product-specific commercial claims remain suppressed until the source is checked again.