What is the reducing balance method of interest payment?

Q: I want to invest in a property in the Bangalore city. The budget is too much for me. So I planned on taking loan. I have heard a lot about reducing balance method of interest payment. Could you please provide some details regarding the same? Thank You.

Rakesh, Bangalore

19th October 2011

Home Loan in Bangalore

reducing balance method of interest payment

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Reducing balance method of of calculating interest is better when taken a home loan. You will get to know what amount of loan bank is charging. In reducing balance method, you first reduce the amount of principal payment already paid by you from the initial loan amount. You pay interest only on principal amount unpaid till that point of time and not on the entire loan amount.