Q.

Difference between flat and reducing rate of interest

28 Mar '07 06:46 pm

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Answers (2)

1.

think you are asking about diminishing and flat interest rate . correct?

see this is how bank calculate EMI .

Principal x Interest% x no of years +loan amount /Tennure

say, you have taken loan of Rs.50000 from bank what will be the EMI at 6% diminishing interest rate for 3 years.

50000x6%x4+50000/3=Rs 20.667 for 1 year=Rs1722 /month

now you see ,you are paying Rs. 1722 ( P= 1389 + int = 333)

now onward yr interest will be calculated 50000-1389=48611

and for fixed there wont be anything changed as it is fixed .I have just share my ideas .you may get much better answer than me . Thank you

Answered by sumit bagla, 28 Mar '07 07:08 pm
see this is how bank calculate EMI .

Principal x Interest% x no of years +loan amount /Tennure

say, you have taken loan of Rs.50000 from bank what will be the EMI at 6% diminishing interest rate for 3 years.

50000x6%x4+50000/3=Rs 20.667 for 1 year=Rs1722 /month

now you see ,you are paying Rs. 1722 ( P= 1389 + int = 333)

now onward yr interest will be calculated 50000-1389=48611

and for fixed there wont be anything changed as it is fixed .I have just share my ideas .you may get much better answer than me . Thank you

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2.

The flat rate of interest is fixed rate at the time loan was taken.

It will not go up if the interest rate go up, on the other hand it will also not go down if the inters goes down, it is fixed for the term of the loan. Your repayment stays same.

On the other hand the payment will go up and down as the interest moves increasing or decreasing.

With this your repayments will also increase and decrease.

Answered by ajit Birdi, 28 Mar '07 08:48 pm
It will not go up if the interest rate go up, on the other hand it will also not go down if the inters goes down, it is fixed for the term of the loan. Your repayment stays same.

On the other hand the payment will go up and down as the interest moves increasing or decreasing.

With this your repayments will also increase and decrease.

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