Flat vs Reducing Interest Rate Converter
What a "flat rate" loan really costs, expressed as the reducing-balance rate loans are actually compared on.
Your numbers
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₹5 lakh
₹ MoneyLingo · moneylingo.in
Flat vs Reducing Interest Rate Converter
Worked out on 13/8/2026
| Loan amount | 500000 |
|---|---|
| The "flat" rate you were quoted | 12 |
| Tenure in months | 60 |
My scenarios (0/10)
Snapshots of your inputs, so you can flip between them — “20 years at 9%” against “15 years at 9.5%”. Stored in this browser only, no account needed.
On a reducing balance — 1.7× the rate you were quoted
- Quoted flat rate
- 12%
- EMI
- ₹13,333
- Total interest
- ₹3,00,000
What this means
- A 12.00% FLAT rate over 5.0 years costs the same as roughly 20.31% on a reducing balance — about 1.7 times the advertised figure.
- Under a flat rate, interest is charged on the full original amount for the entire tenure, even though you have paid most of it back. Under a reducing balance, interest is charged only on what you still owe.
- Always ask for the annual percentage rate on a reducing balance. If a lender will only quote a flat rate, that itself tells you something.
Questions people actually ask
- Why is a 12% flat rate not 12%?
- Because interest is charged on the whole original amount for the entire tenure, even after you have repaid most of it. A 12% flat loan over five years costs about the same as a 21% reducing-balance loan. The reducing-balance rate is the only number on which two loans can honestly be compared.
Where these numbers come from
Every rate this tool uses, its source, and the date a human last checked it against that source.
- DICGC deposit insurance cover, per depositor per bank · checked 2026-04-05
Covers principal and interest together, aggregated across all branches of the same bank, in the same right and capacity.
- s.194A threshold for interest paid by a bank to a resident · checked 2026-04-05
- s.194A threshold for a resident senior citizen · checked 2026-04-05
- s.194A rate where PAN is furnished · checked 2026-04-05
20% where PAN is not furnished. TDS is not the final tax — the interest is still taxable at your slab rate.
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Understand what the number means
A figure on its own decides nothing. These explain what is being calculated and what changes it.