In Flat Interest Rate loans, interest is calculated on the initial principal amount througout the loan tenure. 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. In real time scenario reducing rate option is better over flat rate when you borrow money.
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.
Effective Interest Rate equivalent. Flat interest rates generally range from 1. 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. LendingTree helps simplify financial decisions through choice, education, and support.
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Diminishing interest rate - in this type of rate of interest, the borrower needs to pay interest on the remaining amount and not the full. Like if a has borrowed Rs. Most efficient method for converting flat rate interest to APR.
Example = reducing rate is now u want to convert in to flat. Total amount to be repaid 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).
Flat Rate of Interest basically means that interest is charged on the full amount of the loan throughout its entire loan tenor. Thus the flat rate does not take account of the fact that periodic repayments, which include both interest and principal, gradually reduce the outstanding loan amount. Enter the loan amount you wish to avail in the EMI calculator. Then enter the loan tenure (months). And the rate of interest ( reducing ). Our EMI calculator will tell you just how much your EMI amount comes to.
This does not consider the monthly EMIs that gradually reduce the principal amount. This calculator provides a method of comparing compound and flat rates of interest.
The general rule of conversion is to divide the reducing rate by 1. To make things easier to understan two loans are advertised: one is a flat. For example, an APR of 7.
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