Flat Rate vs EMI Loan Comparer
Banks quote a low flat rate that can quietly cost you more. Put the same loan under both methods — flat interest and reducing-balance EMI — and see exactly which one costs less and by how much.
Plain-English explanation
Flat rate interest is calculated on the full loan amount for the entire term — even though you repay part of the loan every month. With a flat rate of 8% for 3 years you pay 8% × 3 = 24% of the loan amount as interest, no matter how fast you repay.
Reducing balance (EMI) interest is charged only on the money you still owe. Each monthly payment shrinks the balance, so less interest is added next month. That is why the same yearly number means much less total interest under reducing balance.
Rule of thumb: a reducing-balance rate of about double the flat rate gives roughly the same total interest. Always ask the bank whether a quoted rate is flat or reducing before you sign.