What is reducing rate of interest?

Interest calculated on outstanding principal that decreases each month. As you pay EMIs, the interest portion reduces.

How to convert flat to reducing rate?

Reducing Rate ≈ Flat Rate × 1.78 to 1.85. A 10% flat rate equals roughly 17.8% reducing rate.

Reducing rate is almost always better. You pay significantly less total interest over the loan tenure.

Compare flat rate vs reducing rate interest. Calculate how much you save with reducing balance method and convert between rates.

Loan Amount (₹)

Flat Interest Rate (%)

Tenure (Months)

Monthly EMI

\u20b916,134

Total Interest

\u20b980,809

Total Payment

\u20b95,80,809

What is reducing rate of interest?: Interest calculated on outstanding principal that decreases each month. As you pay EMIs, the interest portion reduces.
How to convert flat to reducing rate?: Reducing Rate ≈ Flat Rate × 1.78 to 1.85. A 10% flat rate equals roughly 17.8% reducing rate.
Which is better for borrowers?: Reducing rate is almost always better. You pay significantly less total interest over the loan tenure.