Flat-to-reducing rate converter
Compare a flat interest rate with the equivalent reducing-balance rate and see why the numbers differ.
These figures are estimates for learning purposes. They are not a quote or an offer from a lender.
How it works
With a flat rate, interest is charged on the full original amount for the whole term, even though you repay part of it every month. The converter finds the reducing-balance rate that would produce exactly the same monthly instalment, so the two can be compared fairly.
Limitations
This is an educational comparison for loans with equal monthly instalments and no fees. Use the APR or effective rate disclosed by the lender where one is provided, because it may include fees and follow local calculation rules.
Global Loan Advisor is an independent educational research platform. We do not lend money, broker loans, guarantee financial outcomes or provide personalized financial advice. Our content is intended for general educational purposes. Your figures stay in your browser and are not sent to us.