Flat to reducing rate conversion table
| Flat rate | 1 yr | 2 yr | 3 yr | 4 yr | 5 yr |
|---|---|---|---|---|---|
| 2.50% | 4.58% | 4.73% | 4.76% | 4.75% | 4.73% |
| 3.00% | 5.49% | 5.66% | 5.68% | 5.67% | 5.64% |
| 3.50% | 6.40% | 6.58% | 6.60% | 6.58% | 6.54% |
| 4.00% | 7.30% | 7.50% | 7.51% | 7.47% | 7.42% |
| 4.50% | 8.21% | 8.41% | 8.41% | 8.36% | 8.29% |
| 5.00% | 9.10% | 9.32% | 9.31% | 9.24% | 9.15% |
| 6.00% | 10.90% | 11.13% | 11.08% | 10.97% | 10.85% |
| 7.00% | 12.68% | 12.91% | 12.83% | 12.68% | 12.50% |
Equivalent annual reducing-balance rates for monthly repayments.
Why the difference is so big
With a flat rate you pay interest on the full original loan for the whole term. But because you repay part of the loan every month, on average you owe only a little over half the original amount. Paying the same interest on roughly half the balance is why the true rate is almost double.
Read more in flat rate vs reducing rate: how UAE banks advertise loans, or use the full UAE loan calculator.
Frequently asked questions
How do I convert a flat rate to a reducing rate?
Work out the monthly instalment under the flat rate – (loan + loan × flat rate × years) ÷ months – then find the reducing-balance rate that gives the same instalment for the same loan and term. There is no exact closed formula, so calculators solve it numerically.
Is there a quick rule of thumb?
For loans of 1–5 years, the reducing rate is roughly 1.8 to 1.9 times the flat rate. Longer terms push the multiple slightly higher.
Which rate should I use to compare loans?
Always the reducing (declining-balance) rate, also called the effective rate or APR. It reflects the interest you really pay on the money you still owe.
Last reviewed: October 2026