About this calculator
With a flat rate, interest is charged on the full loan for the whole tenure, even though you repay part of it every month. The same quoted number costs far more than on a reducing-balance loan.
Home loans and most bank loans use reducing balance. Flat rates still appear in some vehicle, consumer and small loans. Compare loans using the real rate below.
How it is calculated
- Total interest = loan × flat rate × years.
- EMI = (loan + total interest) ÷ months.
- The real rate is the monthly rate that makes the EMIs worth exactly the loan today, multiplied by 12.
Assumptions. No fees. If there are processing fees, use the true loan cost calculator.
Questions
Is a flat rate illegal?
No, but lenders should show you the effective rate. Ask for the annual percentage rate (APR) in writing.
What is a fair comparison?
Compare the real rate, not the quoted one. A flat 8% is often near 15%.
Is this exact?
It is a standard formula using the numbers you enter. Your bank, fund or lender may round differently or use different dates, so treat it as a close estimate and check the final figure with them.