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.