Flat vs Reducing Rate Calculator

Convert between flat and reducing (diminishing) interest rates. Compare EMI and total cost to understand the real cost of your loan.

Loan Amount (₹)

Quoted Flat Rate (% p.a.)

Tenure (Years)

Actual (Reducing) Rate You're Paying

17.27%

10% flat ≈ 17.3% reducing (×1.73)

Parameter	Flat Rate (10%)	Reducing Rate (10%)
Monthly EMI	₹12,500	₹10,624
Total Interest	₹2,50,000	₹1,37,411
Total Payable	₹7,50,000	₹6,37,411
You Pay Extra (Flat vs Reducing)	₹1,12,589

💡 Tip:Always ask for the reducing rate (or effective annual rate) when comparing loans. A "low" flat rate can be significantly more expensive than it appears.

Frequently Asked Questions

What is flat rate vs reducing rate?▼

Flat rate charges interest on the original principal throughout. Reducing rate charges interest only on the outstanding balance. Banks use reducing rate but NBFCs/dealers may quote flat rate.

How to convert flat rate to reducing rate?▼

A rough rule of thumb: Reducing Rate ≈ Flat Rate × 1.8 to 1.9. But the exact multiplier depends on tenure. This calculator gives you the precise equivalent.

Why do car dealers quote flat rate?▼

Flat rate looks lower and more attractive. A 10% flat rate is actually equivalent to ~17-18% reducing rate, which sounds much higher.

Which rate do banks use?▼

All banks in India use reducing balance (diminishing) method as per RBI guidelines. The flat rate is commonly used by NBFCs, car dealers, and personal loan agents.

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Flat vs Reducing Rate Calculator

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