Finance
Flat vs Reducing Rate Calculator
Many car dealerships, NBFCs and informal lenders quote a flat (add-on) rate. It sounds cheap until you compute the equivalent reducing-balance APR — usually 70-90% higher. We show side-by-side EMIs, total interest, and the equivalent APR so you can negotiate or walk away with confidence.
The same rate quoted as either flat or reducing.
Equivalent reducing-balance APR
A 9% flat-rate loan is roughly equivalent to a 15.71% reducing-balance APR.
Flat — Monthly EMI
₹24,167
Looks small but stays constant
Reducing — Monthly EMI
₹20,758
Flat — Total interest
₹4,50,000
Reducing — Total interest
₹2,45,501
Extra you pay (flat)
₹2,04,499
Extra EMI (flat)
₹3,408
Peak: ₹4,50,000
Always insist on a reducing-balance quote. Most car-dealer financing and informal lenders quote flat rates — and the difference compounds against you.
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Frequently asked
- Why do car loans sometimes look so cheap on the brochure?
- Because they quote flat rates. A '7% flat' car loan can be ~13-14% reducing-balance APR — which is what your money actually costs you.
- Should I ever take a flat-rate loan?
- Almost never, unless it's the only credit available and the amount is tiny. For anything material, insist on a reducing-balance quote — that's how every regulated home/auto/personal loan in India is structured.
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