Flat vs Reducing Rate Calc
Compare flat rate and reducing balance EMIs side by side.
Flat Rate
Breakdown
EMI
₹12,500
Interest
₹2,50,000
Total
₹7,50,000
Reducing Balance
Breakdown
EMI
₹10,624
Interest
₹1,37,440
Total
₹6,37,440
You save with Reducing Balance
₹1,12,560
What is Loan Comparison (Flat vs Reducing)?
When taking a loan, the way interest is calculated can significantly affect how much you actually pay. The three most common interest calculation methods are Flat Rate, Reducing Balance, and Reducing Rate (Alternate Rate).
This calculator helps you compare these methods side by side to understand the true cost of borrowing.
How Loan Comparison (Flat vs Reducing) Works
In a Flat Rate loan, interest is calculated on the entire original amount for the full tenure. In Reducing Balance, interest is only on the remaining principal. The Reducing Rate shows the equivalent reducing-balance rate for the same EMI as a flat rate loan.
Flat Rate
Interest on full principal for entire tenure — looks cheaper but costs more
Reducing Balance
Interest only on outstanding principal — used by modern loans
Alternate Rate
Equivalent reducing balance rate for a flat rate EMI — reveals true cost
Key Benefits
True Cost Comparison
See the real difference between flat and reducing rates
Effective Rate
A 10% flat rate may be 17-19% on reducing balance basis
Fair Comparison
Compare loan offers from different lenders accurately
Informed Decisions
Make better borrowing decisions with full transparency
Important Disclaimer
This explanation is for educational purposes only. Actual loan terms, interest rates, and calculation methods may vary by lender.
Always review the loan agreement and repayment structure before making borrowing decisions.