How this calculation works
Compare what the same quoted annual percentage costs under two interest methods. Flat interest continues to charge the original principal even as payments return capital; reducing interest charges only the outstanding balance. This explains why identical rate labels do not mean identical borrowing costs. The result compares the two methods at the same rate, not an equivalent-rate conversion.
Worked example
This example uses illustrative inputs. Your current result is shown above.
Borrow ₹1,20,000 for one year at a quoted 12%. Flat interest is ₹14,400, giving ₹11,200 monthly. Reducing-balance EMI is ₹10,661.85 and total interest ₹7,942.26. At this same quoted rate, flat interest costs ₹6,457.74 more before fees.
Assumptions and limits
- Principal, rate and term are identical for the two methods, with monthly on-time repayments.
- Fees, early closure rebates and lender rounding are excluded. A flat percentage is not presented as an APR or a reducing-balance equivalent.
Questions people ask
Does the smaller flat-rate number mean the cheaper loan?
Only a matched cash-flow comparison can establish that. The same stated percentage normally costs more under flat interest because it uses a larger interest base.
Where can I find the equivalent reducing rate?
Use Interest Rate with the flat-loan payment, principal and term. That solves the periodic rate implied by those repayments; APR additionally considers upfront fees.