Flat vs Reducing Rate Calculator
Compare flat and reducing balance interest rates for any loan
Unit: ₹
Unit: %
Unit: months
Flat Rate EMI
₹18,056
Flat Rate Total Interest
₹1,50,000
Effective Reducing Rate
19.46%
How this calculator works
Compare flat rate vs reducing balance rate — see the real cost difference, effective rate, and EMI for both methods.
Quick tips
- •A 10% flat rate over 3 years is roughly equivalent to 17-18% reducing rate.
- •Always ask your lender for the effective annual rate (EAR) before signing.
- •RBI mandates reducing balance for all regulated home and education loans.
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Flat vs Reducing Rate Calculator
This flat vs reducing rate calculator helps you see the real cost difference between flat and reducing balance interest methods, so you can make informed borrowing decisions.
Formula: Effective Reducing Rate ≈ 2 × N × Flat Rate / (N + 1)
- A 10% flat rate over 3 years is roughly equivalent to 17-18% reducing rate.
- Always ask your lender for the effective annual rate (EAR) before signing.
- RBI mandates reducing balance for all regulated home and education loans.
Frequently Asked Questions
Which is cheaper, flat or reducing rate?
Reducing balance is always cheaper for the same quoted rate because interest is calculated on the declining principal, not the original amount.
Why do NBFCs still quote flat rates?
Flat rates appear lower and are simpler to market. A 10% flat rate sounds cheaper than 18% reducing rate, even though the total cost is the same.