True cost of flat-rate loans. The Flat vs Reducing Rate Calculator takes loan amount, flat interest rate quoted, tenure and returns equivalent reducing-balance rate plus emi at the flat rate, total interest at the flat rate, emi if 8% were a reducing rate. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
The headline interest rate is only part of what a loan costs: fees, the structure of repayments and how the rate is quoted (flat or reducing) all change the true cost. Compare offers on total interest and effective rate, not on EMI alone. Use the worked example below to check the maths against your own figures.
How the Flat vs Reducing Rate Calculator works
A flat rate charges interest on the original amount for the whole term, so an 8% flat rate is about 14.5% on the reducing-balance basis banks use. Always convert before comparing.
Worked example
With the example values (loan amount of ₹500,000, flat interest rate quoted of 8%, tenure of 5 years), the equivalent reducing-balance rate is 14.13%; emi at the flat rate ₹11,666.67, total interest at the flat rate ₹200,000.00, emi if 8% were a reducing rate ₹10,138.20. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
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Frequently Asked Questions
How is equivalent reducing-balance rate calculated?
flat EMI = (amount + amount × flat rate × years) ÷ months; the equivalent reducing rate is the rate that produces the same EMI on a declining balance.
Which figures do I need?
Loan amount, flat interest rate quoted, tenure. Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
Does the result include fees and charges?
Only where there is a fee input. Processing fees, insurance and prepayment charges add to the true cost; the APR and loan comparison calculators include them.
