About the Reducing vs Flat Rate Calculator
What is the Reducing vs Flat Rate Calculator?
A flat rate charges interest on the full original loan for the whole tenure, even as you repay it. A reducing-balance rate charges interest only on what you still owe. The same quoted rate therefore costs far more on a flat basis.
Enter the loan, rate and years. The calculator compares the monthly payment and total repayment under both methods and shows the saving from a reducing-balance loan.
How to use the Reducing vs Flat Rate Calculator
- Loan Amount (INR) (sample: 10,00,000)
- Rate (% per year) (sample: 10)
- Years (sample: 5)
- Press Compare Rate Types (results also refresh as you type). The result card shows the Potential Saving, along with Reducing EMI, Flat Monthly and Reducing Total.
Formula used
Flat EMI = (P + P × R × T ÷ 100) ÷ (12 × T)
- Reducing EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
A flat rate is roughly equivalent to a reducing rate 1.7 to 1.9 times higher, depending on the tenure.
Worked example
These are the sample values already filled in the calculator above, and the result it returns for them:
| Input | Sample value |
|---|---|
| Loan Amount (INR) | 10,00,000 |
| Rate (% per year) | 10 |
| Years | 5 |
| Result | Value |
|---|---|
| Potential Saving | ₹2,25,177 |
| Reducing EMI | ₹21,247 |
| Flat Monthly | ₹25,000 |
| Reducing Total | ₹12,74,823 |
Tips for using the Reducing vs Flat Rate Calculator
- Consumer durable, vehicle and microfinance loans sometimes quote flat rates — always ask.
- Convert any flat rate to its effective rate before comparing offers.
- RBI requires lenders to disclose the annualised rate in the Key Fact Statement.