The standard reducing-balance EMI: the monthly outgo, the total interest across the tenure, and what the loan really costs before you sign for it.
EMI = P×r×(1+r)ⁿ ÷ ((1+r)ⁿ − 1), where P is the principal, r the MONTHLY interest rate and n the number of months. Early instalments are mostly interest; the principal share grows over the tenure.
It lowers the monthly EMI but raises the total interest — often dramatically. Compare the total repayment figure, not just the EMI, before choosing a tenure.
A flat rate charges interest on the ORIGINAL principal for the whole tenure; reducing balance charges only on what you still owe. A 10% flat rate costs roughly as much as an 18% reducing rate — always ask which one a lender is quoting.
Yes — the reducing-balance formula is the same for home, car, personal and business loans. Only the rates and tenures differ.
See all free business tools. The calculator loads below — if it does not appear, enable JavaScript.