Calculators · Rate converter
A 12% flat rate isn't 12%.
Some lenders quote flat rates because they look cheaper. This calculator shows what a flat rate really costs on a reducing-balance basis — the standard every bank EMI uses — so you can compare quotes fairly.
Flat rate vs reducing balance — the difference
A flat rate charges interest on the full original principal for the entire tenure, even as you repay it. A reducing-balance rate charges interest only on what's still outstanding each month. Since your balance falls with every EMI, the same percentage costs far more as a flat rate.
Rule of thumb: a flat rate is roughly 1.7–1.9× its reducing-balance equivalent on typical tenures. A 12% flat quote on a 3-year loan works out near 21% reducing — which is what you should compare against bank offers.
How the conversion works
The calculator first computes the flat-rate EMI: (principal + principal × flat rate × years) ÷ months. It then solves for the reducing-balance rate that produces the same EMI — the effective rate. That single number lets you line up a flat-rate quote from a dealer or small financier against any bank or NBFC offer.
Whenever a quote sounds unusually cheap, ask one question: flat or reducing? Every offer on Samridhya is quoted on the reducing-balance standard.
Common questions.
What does a 10% flat interest rate equal in reducing rate?
Roughly 17.5–18.5% reducing on tenures of 2–5 years. Use the calculator with your exact tenure — the gap widens with longer tenures.
Why do lenders quote flat rates?
Because the number looks smaller. Flat rates are common in vehicle finance, consumer durable loans and informal lending. Banks and most NBFCs quote reducing-balance rates, which is the fair-comparison standard.
Which is better — flat or reducing rate?
At the same quoted percentage, reducing balance is always cheaper for you. When comparing two offers, convert any flat quote into its reducing equivalent first — never compare the raw numbers.
Are Samridhya's loan offers flat or reducing?
All offers from lenders on Samridhya are quoted on the monthly reducing-balance basis — the same standard used by banks and this site's EMI calculators.