Flat vs reducing interest rate
Convert the “flat” interest rate a car or personal loan is quoted on into the true reducing-balance rate you are actually paying, so you can compare it honestly.
Runs entirely in your browserRuns entirely on your device — nothing you type is sent anywhere. Educational only, and not investment advice.
How to use this calculator
Each step names a control you will find on screen above.
- Loan amount
The principal you are borrowing.
- Flat rate (quoted)
The flat rate the dealer or lender advertises. Flat means interest is charged on the full original amount for the whole tenure.
- Tenure
The loan term in years. A longer flat-rate loan hides an even bigger gap from the true rate.
Worked example: A 10% flat car loan
A ₹5,00,000 loan quoted at a 10% flat rate over five years.
What to enter
- Loan amount
- ₹5,00,000
- Flat rate (quoted)
- 10%
- Tenure
- 5 years
What it shows you
- Monthly EMI
- ₹12,500
- Total interest
- ₹2,50,000
- True reducing rate
- ≈ 17.3%
- Versus the quote
- ~1.7× the flat rate
Where this is taught
A calculator gives you a number. These explain what the number means and when it misleads you.
- Risk & Psychology11 minPrepay the home loan or invest?The most common financial question in India, worked through properly — including the tax regime detail that changes the answer.
- Market Basics11 minWhich loans to clear before you invest a rupeeClearing a 42% credit card is a guaranteed, tax-free 42% return. Clearing an 8.5% home loan usually is not. The order matters more than the effort.
- Market Basics13 minWhat a loan actually costs: flat rate, reducing balance and "no-cost" EMIThe same loan can be quoted at 10% or at 18% without either number being false. Converting a quote, pricing the fees, and reading a no-cost EMI.