logo logo

What is the difference between monthly rest & annual rest?

In a monthly rest, the interest is calculated on the outstanding principal at the beginning of every month. Once the interest is calculated at the rate applicable to you for the month it is deducted from the EMI received during the month. 
Annual rest works on the same principal only the interest is calculated on your outstanding principal at the beginning of every year. It is also commonly known as “Yearly Reducing Balance”. 
Monthly reducing balance is a better option since you get credit for repayments made immediately and accordingly the interest component keeps reducing on monthly basis.