Convert a flat interest rate into the equivalent reducing-balance rate and see the true cost of the loan.
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Calculated from your inputs
Equivalent reducing-balance rate
Monthly EMI
Total interest
Total repayment
How this is calculated
Flat interest is charged on the full loan for the whole term. The equivalent reducing-balance rate is the annual rate whose standard EMI equals the flat-rate instalment. Fees and insurance are excluded.
Defaults are editable examples, not current provider quotes. Results are rounded for display. These are scenarios from your inputs, not live market data or investment advice.
About the Flat vs reducing rate calculator
A flat rate charges interest on the full loan amount for the whole term, even though you repay part of it every month. A reducing-balance rate charges interest only on what is still owed.
For the same EMI, the reducing-balance rate is much higher than the flat rate. This calculator finds it, so loans quoted in different ways can be compared.
How the Flat vs reducing rate calculator works
Flat EMI = (P + P × flat rate × years) ÷ months
The calculator works out the flat-rate EMI, then searches for the reducing-balance rate whose standard EMI is the same.
Worked example
Example inputs
Loan amount
₹5,00,000
Flat annual interest rate
10%
Time period
3 years
Calculated result
Equivalent reducing-balance rate
17.92%
Monthly EMI
₹18,055.56
Total interest
₹1,50,000
Total repayment
₹6,50,000
Why use a Flat vs reducing rate calculator?
Compare a dealer’s flat-rate offer with a bank’s reducing-rate loan.
See the true annual cost of a loan quoted at a flat rate.
Flat vs reducing rate calculator FAQs
Why does a flat rate look cheaper?
Because it is applied to the original amount and quoted as a smaller number, while you are repaying principal all along. The real cost is closer to the reducing-balance equivalent.
Where are flat rates used?
In some vehicle, consumer durable and small business loans. Banks generally quote reducing-balance rates.
What should I compare between loans?
The annual percentage rate (APR) in the Key Fact Statement, which includes fees, or at least the reducing-balance rate.
Does the term change the equivalent rate?
Yes, a little. The calculator works it out for the term you enter.