Fixed vs Floating Rate EMI Calculator

Fixed Rate Details

Reducing Rate Details

About Fixed vs Floating Rate EMI Calculator

Fixed vs Reducing Rate EMI Calculator — compare the long-term impact of choosing a fixed interest rate (flat rate) versus a reducing balance interest rate. Make a financially sound decision by analyzing how different calculation methods affect your EMI, total interest payout, and total payment through a side-by-side comparison.

How to use this Calculator

  1. In the Fixed Rate Details section, enter the loan amount, annual interest rate, and tenure in months for the fixed rate option.
  2. In the Reducing Rate Details section, enter the loan amount, annual interest rate, and tenure in months for the reducing balance option.
  3. The calculator automatically displays the equivalent years and months for the tenure you enter.
  4. Click Calculate Comparison to see a detailed comparison table showing principal amount, monthly EMI, total interest payable, and total payment for both loan types.

Example Comparison

Consider a Home Loan of ₹50,00,000 for 20 years (240 months):

  • Fixed Rate (9%): EMI is ₹44,986. Total Interest: ₹57,96,711. Total Payment: ₹1,07,96,711.
  • Reducing Rate (8.5%): EMI is ₹43,391. Total Interest: ₹54,13,879. Total Payment: ₹1,04,13,879.

The reducing balance method saves you roughly ₹3.8 Lakhs in total interest compared to the fixed rate method. This is because reducing balance calculates interest only on the outstanding principal, which decreases with each payment. Use this calculator to compare different scenarios and make an informed decision.

Key Differences: Fixed vs. Reducing

Fixed Rate (Flat Rate)

  • Calculation: Interest is calculated on the original loan amount throughout the entire tenure.
  • EMI: Remains constant, easier to budget.
  • Total Interest: Higher total interest payment compared to reducing balance.
  • Common Use: Personal loans, some consumer loans.

Reducing Rate (Reducing Balance)

  • Calculation: Interest is calculated only on the outstanding principal, which reduces with each payment.
  • EMI: Remains constant, but interest component decreases over time.
  • Total Interest: Lower total interest payment.
  • Common Use: Home loans, car loans, most secured loans.

FAQs

When should I choose a Fixed Rate?
Choose a fixed (flat) rate only if you have no other option. Most modern loans use reducing balance because it's more fair to borrowers. Fixed rates are typically used for small personal loans with short tenures.
When is a Reducing Rate better?
Reducing balance is almost always better for borrowers. It results in lower total interest payments because interest is calculated only on the outstanding principal. Always ask your lender if they offer reducing balance rates, especially for home loans and car loans.
Can I convert from Fixed to Reducing?
It depends on your loan agreement. Some lenders may allow conversion, but it's rare. It's best to negotiate for a reducing balance rate from the beginning.
How much can I save with Reducing Balance?
The savings can be substantial. On a ₹50 lakh loan for 20 years, you could save ₹3-4 lakhs or more in total interest by choosing reducing balance over fixed rate. The longer the tenure, the greater the savings.

Disclaimer: This calculator provides estimates based on the inputs you provide. Actual EMI amounts may vary based on your lender's terms and conditions. Use this calculator to compare options and make informed financial decisions.

Disclaimer

The calculators on A2ZCalculate.com are for informational purposes only. We do not guarantee accuracy and recommend verifying results independently. Consult a professional for personalized advice. A2ZCalculate.com is not responsible for any errors or actions taken based on the information provided.