Flat interest rate on car loans
The lenders in Qatar are charging flat interest rate like 3% (with no P.A. word with it), instead of per year basis, which is perhaps unfair. The local regulation only allows the lenders to apply and calculate the interest on per annam (per year) basis ONLY on the consumer loans including the car loans.
The flat rate favors the lenders to take full and undue advantage of interest whilst adding it up on the loan for full loan period (say four years), at the first day of loan.
Worldwide the loan interest rate is quoted and calculated on per annam basis like 7% P.A. and the accrued interest of previous 30 days, then is added up in the loan account at the last of each month.
This requires clarity.
Per annum rate is always applied on the reduced monthly balance of the loan after the installment has actually reduced the loan amount, whereas the flat rate is upload at the start of loan when the loan is at its peak amount, even before any installment has reduced it, which therefore gives advantage to the bank and disadvantage to the borrower.
Regulation requires max 6% on reducing balance method dear, not on per annum (flat rate basis). if you convert 6% reducing balance to flat rate it is equal to 3.175% per annum. But the calculations are done based on reducing method as per qcb directives.