Calculate EMI using a flat interest rate and see the equivalent reducing-balance rate. A "12% flat" loan is really closer to 21% reducing — this shows the gap.
Flat-rate loans quote a low-looking number that hides the real cost. Interest is charged on the entire original principal for the whole tenure — even the part you've already repaid — so a '12% flat' loan behaves like roughly 21% on a reducing balance.
Vehicle and business loans are often pitched flat because the headline rate sounds cheaper. This tool computes the flat EMI and the equivalent reducing-balance rate, so you can compare offers on the same footing.
₹5,00,000 at 12% flat over 36 months: total interest ₹1,80,000, EMI ₹18,889. The same EMI on a reducing balance implies about a 21.3% rate — the true cost of 'cheap' flat interest.
As a rule of thumb, flat rate ≈ reducing rate ÷ 1.8. A 12% flat loan is close to a 21–22% reducing loan. Always ask which basis a quote uses before comparing.
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