Flat vs Reducing Rate Calculator
Compare flat and reducing interest rate calculations to see potential savings.
Flat vs Reducing Rate Calculator
What does this calculator do?
This calculator helps you compare two common types of interest rates used in loans – Flat Rate and Reducing Balance Rate. It shows you how much total interest you’ll pay under each method and helps you understand the real cost of borrowing.
Why and when should you use this calculator?
If you’re planning to take a personal loan, home loan, or car loan, it’s important to understand how interest is being charged. Some lenders show attractive flat rates, which may look low but actually result in higher overall interest. This tool helps you decide which type of loan offer is better by comparing both rates side-by-side.
Use this calculator when:
- Comparing two or more loan offers
- Negotiating loan terms with a bank or lender
- Planning your EMIs and budgeting
How to use this calculator:
- Enter your loan amount
- Enter the tenure of your loan (in months or years)
- Enter the Flat interest rate (%)
- Enter the Reducing interest rate (%)
- Click on “Calculate”
The tool will show you:
- Total interest and total repayment for both types
- A clear comparison so you can choose the better option
Tips & Insights:
- Flat Rate charges interest on the full loan amount throughout the loan term, even though your outstanding balance reduces.
- Reducing Rate (also called Diminishing Rate) calculates interest on the remaining loan balance, so you pay less interest over time.
- Reducing Rate loans are generally more transparent and cost-effective.
Use this tool to avoid misleading offers and make informed loan decisions.