Flat vs Reducing Rate
Compare the true cost difference between flat and reducing balance loans.
Reverse tip: Start with a preset principal and adjust rates to match lender quotes.
Inputs
Five Lakh Rupees
% p.a.
% p.a.
Flat Rate (simple interest)
Principal
₹5,00,000.00Interest
₹2,50,000.00Total outgo over 5.0 years.
Monthly Outgo₹12,500.00
Total Interest₹2,50,000.00
Total Payable₹7,50,000.00
Reducing Balance
Principal
₹5,00,000.00Interest
₹1,44,817.01Interest drops as principal reduces monthly.
Monthly EMI₹10,746.95
Total Interest₹1,44,817.01
Total Payable₹6,44,817.01
Difference
Interest Saving (Reducing vs Flat): ₹1,05,182.99 lower outgo
The reducing balance method charges interest on the outstanding principal, leading to lower total cost compared to a flat rate loan.