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Flat vs reducing balance interest calculator

Enter a loan amount, a yearly rate and a term. Compare flat, reducing balance and bullet interest side by side, then pick one to see the full repayment schedule.

Interest type for the schedule
The three interest types compared for the same loan
Reducing balanceFlat rateBullet
Regular monthly payment8,8859,3331,000
Last payment8,8859,333101,000
Total interest6,61912,00012,000
Total repaid106,619112,000112,000

At the same quoted rate, the flat method costs 5,381 more in interest than reducing balance. It works out the same as a reducing balance rate of about 21.5% a year. A bullet loan charges the same total interest as flat, but the borrower owes the whole amount until the last payment.

Repayment schedule: Reducing balance

Month-by-month repayment schedule
No.Due datePaymentPrincipalInterestBalance
111 Dec 20268,8857,8851,00092,115
211 Jan 20278,8857,96492184,151
311 Feb 20278,8858,04384276,108
411 Mar 20278,8858,12476167,984
511 Apr 20278,8858,20568059,779
611 May 20278,8858,28759851,492
711 Jun 20278,8858,37051543,122
811 Jul 20278,8858,45443134,668
911 Aug 20278,8858,53834726,130
1011 Sept 20278,8858,62426117,507
1111 Oct 20278,8858,7101758,797
1211 Nov 20278,8858,797880
Total106,619100,0006,619

How to read it

With a flat rate, interest is worked out once on the full amount and spread across the term, so it never shrinks as the borrower repays. With a reducing balance, each month's interest is charged only on what is still owed. At the same quoted rate, flat costs more. The last line of the table shows the reducing balance rate that a flat rate is really equal to.

The figures are an estimate for comparison. Fees, late charges and rounding rules can change what a real loan costs, so always show the borrower the actual schedule before they sign.

Read the worked example: flat vs reducing balance interest

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Lend Chief calculates flat and reducing balance schedules for you and records every payment. 14 days free, no card.

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