Flat vs Reducing Rate Calculator
Dealers quote “flat rates” because they look cheap — but flat interest is charged on the full principal for the whole tenure. See the true equivalent reducing rate before you agree.
Adjust & watch it update
Loan Details
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%
Tenure
Tenure Unit
yrs
Flat Rate EMI
—
Monthly EMI under flat rate method
Reducing Balance EMI—
Flat Total Interest—
Reducing Total Interest—
Equivalent Reducing Rate—
Extra Cost (Flat)—
Frequently asked questions
Why is a flat rate misleading?
Flat interest is calculated on the original principal every year, even though you repay principal monthly. A 10% flat rate typically equals a 17–19% reducing-balance rate.
Which rate do banks use?
Banks quote reducing-balance rates for home and personal loans. Flat rates are common in vehicle dealer financing and some consumer-durable loans — always convert before comparing.