Flat vs Reducing Interest
Compare flat interest with amortization at the same stated rate.
Your numbers
Flat-interest monthly payment
Same quoted rates do not mean equal borrowing costs. Fees and lender rounding are omitted.
Scenario comparison
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Formula
Flat interest is I = Pjn/12; reducing-balance payment is A = P/a(j/12,n). P is principal, j is the nominal annual interest fraction, and n is months. a(r,n) sums the monthly discount factors at rate r.
Compare flat interest with amortization at the same stated rate.
Worked example
- Principal
- 12000
- Nominal annual interest rate (%)
- 6
- Term in months
- 12
- Flat-interest monthly payment
- 1,060
- Reducing-balance monthly payment
- 1,032.79715648
- Flat total interest
- 720
- Reducing total interest
- 393.56587782
Scope and limitations
Same quoted rates do not mean equal borrowing costs. Fees and lender rounding are omitted.
Inputs are checked for missing values and allowed ranges. A result outside the finite numeric range is not displayed. Rounding affects display, while the calculation uses the model’s numeric precision.
Check your units and assumptions before relying on a result. Changing a label does not convert a currency or physical unit.
Formula version: 0f5b61344261 · Example checked: