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Flat EMI Equation:
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Flat EMI calculates interest on the entire principal amount for the entire loan tenure, while reducing EMI calculates interest only on the outstanding principal, resulting in lower total interest payments.
The calculator uses these equations:
Flat EMI:
\[ EMI_{flat} = \frac{P + (P \times r \times t)}{t \times 12} \]Reducing EMI:
\[ EMI_{reducing} = \frac{P \times i \times (1+i)^n}{(1+i)^n-1} \]Where:
Explanation: Flat rate keeps interest constant throughout, while reducing rate decreases interest as principal is paid down.
Details: Understanding the difference helps borrowers choose between loan types and calculate total interest payable over the loan term.
Tips: Enter principal in USD, annual interest rate in percentage, and loan term in years. All values must be positive.
Q1: Which is better - flat or reducing rate?
A: Reducing rate is generally better as it results in lower total interest, but flat rate may have lower initial payments.
Q2: How much more do I pay with flat rate?
A: The difference depends on loan amount, rate and term. Our calculator shows the exact difference.
Q3: Are there loans that use flat rate?
A: Some personal loans and short-term loans use flat rates, while most mortgages use reducing rates.
Q4: Can I switch from flat to reducing rate?
A: This depends on your lender's policies. Some may allow conversion with fees.
Q5: Does this calculator account for fees?
A: No, this calculates only principal and interest. Actual EMI may include processing fees and other charges.