Flat vs Reducing Interest
Compare flat-rate markup vs reducing-balance interest side by side — see which method charges you more. This is only an educational comparison, not financial advice.
Monthly comparison table
| Month | Flat installment | Reducing installment | Reducing principal | Reducing interest | Reducing balance |
|---|
Key point to understand
With flat markup, interest is charged on the full original amount — even if half the installments are already paid. That is why the real cost of a flat rate is usually nearly double reducing. In reducing-balance, the remaining amount gets smaller every month, so the interest keeps shrinking too. For every loan offer, do not ask only about the "rate" — always ask the method (flat or reducing); that is where the real difference is.
How to use
- Enter the amount (principal), yearly rate and term (months).
- Press Compare — you will see the total cost and monthly installment of both methods side by side.
- See the detail of each month in the table below.
Disclaimer: this calculator is only an educational estimate — not financial advice or a lending service. Always confirm the real loan terms with the lender.
Tips
- Flat-rate quotes often hide the true cost — the same “8%” costs very different amounts under each method.
- On reducing-balance loans, early extra payments cut total interest more than late ones.
- Use this as a learning tool; check your actual loan’s terms and charges with the lender.
Frequently Asked Questions (FAQ)
What does Flat vs Reducing Interest compare?
Flat-rate markup versus reducing-balance interest side by side: total cost, monthly installment and a month-by-month table.
Why is flat interest more expensive?
With flat markup, interest is charged on the full original amount even after half the installments are paid, so the real cost is usually nearly double.
Is this financial advice?
No; it is only an educational comparison, not financial advice.
What does the month-by-month table show?
Each month's installment split into interest and principal parts, so you can see exactly how the two methods differ over time.