Flat vs Reducing Rate Calculator
A flat interest rate charges interest on the whole original amount for the entire tenure, ignoring every rupee you have already repaid. It is standard on gold loans, used car loans and most personal loans from NBFCs. This calculator converts a flat rate quote into the reducing balance rate it really is.
Where it goes
- The amount you actually borrowed₹1.00 lakh
- Interest−₹30,000
Worth knowing
A "10% flat" loan — what is the real rate?
17.92%. A flat rate charges interest on the whole original amount for the entire tenure, ignoring every rupee you have already repaid. By the end you owe almost nothing but are still paying interest as though you owed all of it.
Why do lenders quote flat rates at all?
Because the number is roughly half the real one. It is standard on gold loans, used-car loans and most personal loans from NBFCs and app-based lenders. A bank quoting a reducing rate is quoting the honest one.
How do I compare two offers?
Only ever compare reducing-balance rates, or compare total interest in rupees. A flat rate and a reducing rate are not the same unit, and putting them side by side is how people end up paying nearly double.
Payment schedule
| Year | Paid | Interest | Principal | Still owed |
|---|---|---|---|---|
| 1 | ₹43,333 | ₹15,723 | ₹27,610 | ₹72,390 |
| 2 | ₹43,333 | ₹10,349 | ₹32,985 | ₹39,405 |
| 3 | ₹43,333 | ₹3,928 | ₹39,405 | ₹0 |
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Tax rules applied as of 2026-Q2, last verified against official sources on 2026-08-23. This calculator does arithmetic on the figures you enter — it is not investment advice, not a recommendation, and not a forecast. All calculators