The dealer said “8% interest”. You are paying about 14.5%.
Two-wheeler finance is quoted at a flat rate. Your home loan is quoted at a reducing rate. They are not the same number, and the gap is roughly double.
Flat vs reducing, in one line
Flat: interest is charged on the whole loan for the whole tenure — even the part you have already repaid. Reducing: interest is charged only on what you still owe.
You repay a two-wheeler loan steadily, so by the final month you owe almost nothing — but a flat rate keeps charging you as though you owed the full amount all along. That is why 8% flat is about 14.5% reducing on a 36-month loan: roughly 1.8× the number you were quoted.
Nothing about this is illegal, and the dealer is not lying — flat is a real convention. The problem is that your home loan, car loan and personal loan are all quoted reducing, so “8%” sounds like a bargain when it is closer to a personal loan rate.
What to ask
- “Is that flat or reducing?” If they hesitate, it is flat.
- “What is the APR?” The all-in number including the processing fee.
- “What is the total amount payable?” Hardest to fudge. Compare that, not the rate.
The multiplier grows with tenure. Over 12 months flat and reducing are close; over 60 months a flat rate is close to double. Longer tenure is where flat quoting does the most damage.