Interest Calculation Decoded
Many lenders in Kenya use "Flat Rate" interest, which stays the same even as you pay down your loan. At Together As One, our reviewed 2% rate is calculated on a Reducing Balance basis. This is a massive win for the borrower and is central to our commitment to stability.
How it Works in Practice
In a reducing balance model, your interest is calculated on the remaining principal, not the original amount borrowed. Here is the lifecycle of your savings:
- Month 1: You pay interest on the full principal.
- Month 2: You pay interest only on what you still owe (Original Principal minus your first principal payment).
- The Result: Every month, your interest payment gets smaller, and more of your installment goes toward paying off the car.
Why Transparency Matters
Flat rates can be deceptive. A 10% flat rate might actually be more expensive than a 15% reducing balance rate over time. Our transparent 2% reducing balance model ensures you pay less total interest over the life of your loan, allowing you to build wealth instead of just servicing debt.