A loan is offered at the same quoted rate of interest for the same term, either at a flat rate or by the reducing-balance method. Which costs the borrower more interest?

Explanation

1. 01

   At a flat rate, interest is charged on the whole loan for the whole term, even after much of it is repaid.

2. 02

   By reducing balance, interest is charged only on what is still owed, so it is less.