In Flat Interest Rate loans, interest is calculated on the initial principal amount througout the loan tenure. In real time scenario reducing rate option is better over flat rate when you borrow money. In this post I will provide you with excel based calculator to convert reducing balance rate to flat interest rate.
Reducing balance to flat interest rate converter -Excel. Effective Interest Rate equivalent. Flat rate to reducing balance rate Excel calculator.
I have previously written on Personal Loan interest rate. A flat rate is a type of interest rate which is calculated on the entire amount of loan throughout its tenure. Most efficient method for converting flat rate interest to APR. Example = reducing rate is now u want to convert in to flat. LendingTree helps simplify financial decisions through choice, education, and support.
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Always choose the method that costs you less. If you face any difficulties to use this calculator, let us know in the comment box. Would you prefer an auto loan with an interest rate calculated on reducing balance, or a flat rate ? The differences between the two are important to understand in order to make an accurate and relevant comparison. Interest is calculated on the full original loan amount for the whole term without taking into consideration that periodic payments reduce the amount loaned. In other words, Flat Rate of Interest basically means that interest is charged on full amount of loan throughout its loan tenure.
This does not consider the monthly EMIs that gradually reduce the principal amount. Total amount to be repaid Rs. Flat interest for years would be Rs. If you need to convert your reducing balance to a flat rate, one of the methods is to divide by 1. There are other tools online where you can type in your rate and convert.
You will find the concept of a flat rate or reducing balance coming up whatever finance you’re looking at – personal loans and finance, car loans and finance or home loans (mortgages) and finance). Interest rate per installment x outstanding loan amount = interest payable for each installment. Learn the difference between flat and reducing rates of interest. So, which one is better – the flat – or the reducing rate ? A good rule of thumb to understanding your loan offers is that if the current interest rate in the market is low, opting for a fixed rate might be beneficial. However, reducing rates are useful if the current interest rates in the market are high.
Like if a has borrowed Rs.
There is a formula to calculat the interest for the whol period (e.g. months). Diminishing or reducing method an 2. Same way there is another formula to convert the interest interest rate frim diminsing rate to flat rate and. This calculator provides a method of comparing compound and flat rates of interest. For example, an APR of 7.
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