Not all lenders quote interest the same way. Toggle between Reducing Balance (used for most home loans) and Flat Rate (common for personal and vehicle loans) to see your real monthly EMI — and how the two methods actually compare for the same loan.
Interest is charged on the outstanding balance, which falls every month. This is how most home loans, LAP and business loans work.
Sample rate for illustration. Your actual rate depends on the lender and your profile.
Your Monthly EMI
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Principal + interest, paid every month
| Year | Principal Paid | Interest Paid | Balance |
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This calculator gives indicative figures only and excludes processing fees, insurance and other lender charges. Final EMI, interest rate and eligibility are decided by the respective lending institution.
Here, P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the number of monthly instalments. Because interest is charged only on what you still owe, your interest portion shrinks and your principal portion grows with every instalment.
Here, interest is calculated on the full original loan amount for the entire tenure, regardless of how much principal you've already repaid. Because the outstanding balance actually reduces every month, a flat rate is typically equivalent to a noticeably higher reducing-balance rate — often somewhere around 1.7–1.9 times the flat rate for a typical 3–5 year tenure, though the exact gap depends on your tenure. Switch the toggle above to Flat Rate to see the real equivalent rate for your own numbers.
Straight answers, so you know exactly what you're comparing.
On a Reducing Balance loan, interest is charged only on the outstanding principal, which goes down every month as you repay — this is how almost all home loans, LAP and most business loans work. On a Flat Rate loan, interest is calculated on the full original loan amount for the entire tenure, even though your outstanding balance is actually falling. For the same quoted rate, a flat-rate loan always costs more.
Nearly all home loans, and most Loan Against Property and business loans from banks, are calculated on a reducing balance. Flat rates are more common with personal loans, consumer durable loans, and some vehicle loans, particularly from NBFCs.
Because the outstanding balance reduces every month, but a flat-rate loan keeps charging interest as if you still owed the full amount throughout the tenure. A flat rate of around 8–10% can end up costing about as much as a reducing-balance rate in the mid-teens, depending on tenure. Use the toggle above to see the actual equivalent rate for your own numbers rather than relying on a generic rule of thumb.
No. Like any EMI calculator, this shows principal and interest only. Processing fees, insurance premiums, documentation charges and any other lender fees are separate and should be confirmed with the lender before you sign.
Yes — switch to Flat Rate mode if your lender has quoted a flat interest rate (common for personal, consumer durable and some vehicle loans), or stay on Reducing Balance for home loans, LAP, and most business or MSME loans.
It uses the standard EMI formulas used across the industry, so the numbers are mathematically accurate for the inputs you provide. The result is still indicative, since your final rate, tenure and fees are decided by the lender based on your actual application.