Loans & interest
Flat vs Reducing Rate Calculator
ఫ్లాట్ రేటు, రెడ్యూసింగ్ రేటు కాలిక్యులేటర్
The true reducing-balance rate of a loan quoted at a flat rate, with the EMI and total interest.
Your result ఫలితం
True interest rate అసలైన వడ్డీ రేటు
10% flat for 3 years costs the same as 17.92% a year on a reducing balance, the way banks quote.
- Monthly EMIనెలవారీ వాయిదా
- ₹18,056
- Principalఅసలు
- ₹5,00,000
- Total interestమొత్తం వడ్డీ
- ₹1,50,000
- Total paymentమొత్తం చెల్లింపు
- ₹6,50,000
- Effective yearly rateవాస్తవ వార్షిక రేటు
- 19.46%
Of the ₹1,50,000 interest, ₹72,917 (49%) is charged on money you have already paid back.
Flat rates and their true cost రేట్ల పోలిక
| Flat rate | True rate (reducing) | EMI | Total interest |
|---|---|---|---|
| 6% | 11.08% | ₹16,389 | ₹90,000 |
| 7% | 12.83% | ₹16,806 | ₹1,05,000 |
| 8% | 14.55% | ₹17,222 | ₹1,20,000 |
| 9% | 16.24% | ₹17,639 | ₹1,35,000 |
| 10% | 17.92% | ₹18,056 | ₹1,50,000 |
| 11% | 19.57% | ₹18,472 | ₹1,65,000 |
| 12% | 21.2% | ₹18,889 | ₹1,80,000 |
| Month | Still owed | Interest charged | On money repaid | Rate on what you owe |
|---|---|---|---|---|
| 1 | ₹5,00,000 | ₹4,167 | ₹0 | 10% a year |
| 2 | ₹4,86,111 | ₹4,167 | ₹116 | 10.29% a year |
| 3 | ₹4,72,222 | ₹4,167 | ₹231 | 10.59% a year |
| 4 | ₹4,58,333 | ₹4,167 | ₹347 | 10.91% a year |
| 5 | ₹4,44,444 | ₹4,167 | ₹463 | 11.25% a year |
| 6 | ₹4,30,556 | ₹4,167 | ₹579 | 11.61% a year |
| 7 | ₹4,16,667 | ₹4,167 | ₹694 | 12% a year |
| 8 | ₹4,02,778 | ₹4,167 | ₹810 | 12.41% a year |
| 9 | ₹3,88,889 | ₹4,167 | ₹926 | 12.86% a year |
| 10 | ₹3,75,000 | ₹4,167 | ₹1,042 | 13.33% a year |
| 11 | ₹3,61,111 | ₹4,167 | ₹1,157 | 13.85% a year |
| 12 | ₹3,47,222 | ₹4,167 | ₹1,273 | 14.4% a year |
How a flat rate compares with a reducing rate
A flat rate charges interest on the whole amount borrowed for the whole loan, even as you repay it. With a loan P, a flat rate f (÷ 100) and n monthly instalments:
interest = P × f × n ÷ 12, EMI = (P + interest) ÷ n
Banks quote home loans on a reducing balance: each month's interest is only on what is still owed. The true rate of a flat loan is the monthly rate r that gives the same EMI in the bank formula:
EMI = P × r × (1 + r) n ÷ ((1 + r) n − 1)
No formula gives r directly, so the calculator closes in on it step by step; the true yearly rate is 12 × r, quoted the way banks quote theirs.
Example: ₹5,00,000 at 10% flat for 3 years: the interest is ₹1,50,000 and the EMI ₹18,056. That is the same as 17.92% a year on a reducing balance, or 19.46% with monthly compounding. A bank loan at 10% reducing for the same 3 years costs ₹80,809 in interest, an EMI of ₹16,134: only 5.39% flat.
Flat rates and their true rates
| Flat rate | 1 year | 3 years | 5 years |
|---|---|---|---|
| 6% flat | 10.9% | 11.08% | 10.85% |
| 8% flat | 14.45% | 14.55% | 14.13% |
| 10% flat | 17.97% | 17.92% | 17.27% |
| 12% flat | 21.46% | 21.2% | 20.31% |
Good to know
- A flat rate is roughly 1.7 to 1.9 times as costly as it sounds: compare loans by the reducing rate, never the flat one.
- On a flat loan almost half the interest (49% over 3 years) is on money you have already paid back.
- Ask for the Key Facts Statement: RBI requires banks and NBFCs to show a retail loan's annual percentage rate (APR), a reducing-balance rate that also counts the fees.
- Processing fees, insurance and GST on fees add to the cost; a "0% EMI" offer often hides them in the price.
Questions
Why does the true rate not depend on the loan amount?
Both the flat interest and the EMI grow in step with the amount, so ₹50,000 and ₹50 lakh at the same flat rate and tenure have the same true rate. Only the flat rate and the number of months change it.
Is the EMI different on a flat rate?
At the same quoted number, yes: 10% flat has a higher EMI than 10% reducing. The calculator turns either quote into the other, so you can compare a dealer's flat offer with a bank's reducing rate.
Does prepaying a flat-rate loan help?
Less than you would hope. Many flat-rate lenders have already counted the full interest, and some charge a foreclosure fee, so ask how much interest is waived before you prepay.
What next? తర్వాత ఏం చూడాలి
See all calculators →Results are estimates for planning, at the rates you enter. Check exact figures with your bank, fund house or tax adviser before you decide.
