Flat vs reducing rate calculator
Some loans quote a flat rate, which charges interest on the full amount for the whole tenure even as you repay it. Enter the offer and see the reducing-balance rate it works out to, the way home and personal loans are usually quoted.
The rate as quoted by the lender or shop. Enter 0 for a "0% EMI" offer.
Optional. Include GST on the fee and any charge taken from the loan or paid at the start.
- Equivalent reducing-balance rate (per year)
- 21.46%
- Monthly EMI
- ₹9,333.33
- Total interest
- ₹12,000.00
- Total you repay
- ₹1,12,000.00₹1.1 lakh
A 12% flat rate for 12 months costs the same as a 21.46% reducing-balance rate. Compare this figure with reducing-balance rates from other lenders.
Estimates for illustration only, based on the numbers you enter. Your bank or lender may calculate differently. This is not financial, tax or legal advice.
The result depends on the numbers you enter. Your lender's loan agreement and key fact statement are what apply.
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Join the betaHow it's calculated
Flat interest = Loan amount × flat rate ÷ 100 × months ÷ 12. EMI = (Loan amount + flat interest) ÷ months.
The equivalent reducing rate is the yearly rate, with monthly rests, at which the same EMI for the same months repays the same loan amount. It is found by trying rates until the two match, then rounded to 2 decimals.
With a processing fee, the loan amount you actually receive is smaller, while the EMI stays the same, so the rate is worked out on the amount after the fee.
This is the same monthly-rest method the EMI calculator uses. Lenders may also add GST on fees, insurance or other charges; add them to the fee to include them.
Questions
What is the difference between a flat and a reducing rate?
A reducing rate charges interest only on the amount you still owe, which falls every month. A flat rate charges interest on the original amount for the whole tenure. So the same number, say 12%, costs much more as a flat rate.
Is a "0% EMI" offer really free?
The interest may be zero, but a processing fee or other charge paid upfront means you receive less than you repay. Enter the fee here to see what it works out to as a yearly rate.
Which rate should I compare between lenders?
Compare like with like: reducing-balance rates, including all fees. Ask the lender for the annual percentage rate (APR) and the full list of charges in the key fact statement before you sign.