# Flat vs Reducing Interest Rate Calculator > Flat vs reducing interest rate calculator: convert a flat rate to its true reducing-balance rate and compare EMIs and total interest on the same loan. Source: https://trykosh.com/tools/flat-vs-reducing-interest-rate-calculator Free tool - Loans and credit cards # Flat vs reducing interest rate calculator A flat rate of 7% is not a 7% loan. Convert any flat rate into its real reducing-balance rate and see how much more it costs. Rules checked 25 October 2026Free - no sign-upRuns in your browser A 10% flat rate equals 17.92% reducing 1.79 times the quoted number EMI at flat rate**INR 10,833** EMI at same reducing rate**INR 9,680** Extra interest on flat**INR 41,514** Interest, reducing **INR 48,486**Extra on flat **INR 41,514** INR 3 lakh for 3 years at 10% Flat rate Reducing rate Interest worked on Full loan, every month Balance left each month Monthly EMI INR 10,833 INR 9,680 Total interest INR 90,000 INR 48,486 Total repaid INR 3,90,000 INR 3,48,486 True yearly rate 17.92% 10% A flat rate charges interest on the original loan for the whole tenure, even after you've repaid most of it. Compare offers only on the reducing rate or the APR. ## Upload your statement and Kosh does this for you. Upload a bank or card statement and Kosh finds every EMI and card charge, then builds the fastest way out of debt that still fits your month. [Start free](/signup?via=tool-flat-vs-reducing-interest-rate-calculator) ## How the flat vs reducing rate calculator works With a flat rate, interest is worked out on the original loan amount for the entire tenure: interest = loan x flat rate x years. That interest is added to the principal and divided into equal EMIs. You pay interest on money you have already repaid. With a reducing rate, interest each month is charged only on the balance still outstanding, so it falls as you repay. This is how banks quote home loans and most other loans, and it's the basis of the standard EMI formula. The calculator takes the flat-rate EMI and finds the reducing rate that produces the same EMI over the same tenure. For loans of 1 to 5 years, the reducing equivalent is usually about 1.7 to 1.9 times the flat rate. It also shows what the EMI and interest would be if the same number were a reducing rate, so you can see the extra interest the flat quote adds. Flat EMI = (P + P x flat rate x years) / months; find r so that P x r x (1 + r)ⁿ / ((1 + r)ⁿ − 1) = flat EMI P loan amount r equivalent monthly reducing rate (x 1,200 for the yearly rate) n months ## Worked example: A dealer quotes 7% flat on a used car Imran is offered INR 6 lakh for 5 years at '7% flat' to buy a used car in Lucknow. The flat EMI is INR 13,500, with INR 2,10,000 of interest. That is the same as a 12.5% reducing-rate loan. A genuine 7% reducing-rate loan would cost INR 11,881 a month, so the flat quote costs him INR 97,157 more over five years. A 7% flat rate equals 12.5% reducing 1.79 times the quoted number EMI at flat rate**INR 13,500** EMI at same reducing rate**INR 11,881** Extra interest on flat**INR 97,157** Interest, reducing **INR 1,12,843**Extra on flat **INR 97,157** A flat rate charges interest on the original loan for the whole tenure, even after you've repaid most of it. Compare offers only on the reducing rate or the APR. [Load this example into the calculator ->](?amount=600000&rate=7&months=60#calculator) ## Good to know - Flat rates show up in dealer-arranged vehicle loans, consumer durable finance and some microfinance and NBFC loans. Banks almost always quote reducing rates. - RBI's Key Fact Statement requires the APR, which is a reducing-balance figure including fees. Ask for it whenever a quote says 'flat'. - The longer the tenure, the bigger the gap between flat and reducing rates, because you pay flat interest on repaid money for longer. ## Frequently asked questions What is the difference between flat and reducing interest rate? A flat rate charges interest on the full original loan for the whole tenure. A reducing rate charges interest only on the outstanding balance each month. For the same headline number, a flat rate costs much more. How do I convert a flat rate to a reducing rate? Work out the flat EMI, then find the reducing rate that gives the same EMI over the same months. As a rough guide, multiply the flat rate by about 1.8 for loans of three to five years, or use the calculator above for the exact figure. Is 10% flat rate the same as 18% reducing? Roughly, for a three-year loan. A 10% flat rate over 36 months works out to about 17.9% on a reducing balance. Over shorter tenures the equivalent is a little lower, over longer ones a little higher. Why do lenders quote flat rates? Because the number looks smaller and the EMI is easy to compute. The cost to you is the same as the much higher reducing rate, so always compare loans on the reducing rate or APR. ## Sources and assumptions - [Reserve Bank of India](https://www.rbi.org.in/) Rules and rates last checked on 25 October 2026. Results are estimates for planning and education, not tax, legal or investment advice. Kosh is an educational financial planning tool by Primedepth Labs. 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