Flat vs Reducing Rate
Don't get fooled by "lower" flat rates. Compare the true cost of flat vs reducing interest rates.
Loan Details
₹
Years
Interest Rates
Interest on original principal
%
Interest on outstanding balance
%
Flat Rate Trap
A 10% flat rate is roughly equivalent to an 18-19% reducing rate. Always compare actual payable amounts!
Reducing Rate Wins
₹0
You save this amount by choosing the reducing rate option.
Flat Rate @ 10%
Monthly EMI₹
Total Interest₹0
Total Payable₹0
Effective Rate: ~% (reducing equivalent)
Reducing Rate @ 12%
Monthly EMI₹
Total Interest₹0
Total Payable₹0
Standard bank/NBFC calculation method
Side-by-Side Comparison
Documentation
Understanding Loan Interest
Flat Rate Interest
Interest is calculated on the original loan amount for the entire tenure. Even as you repay principal, interest remains the same. Often used by NBFCs and dealerships.
Reducing Rate Interest
Interest is calculated on the outstanding balance. As you pay off principal, interest reduces. Used by banks and regulated lenders. This is the fairer method.