Simple vs Reducing Balance Interest Calculator
Many consumer loans advertise a flat simple interest rate that sounds low but ends up significantly more expensive than a reducing balance loan. Compare both methods side-by-side.
📊 Resultados do Cálculo
📐 How This Calculation Works
This tool uses standard periodic compound interest and amortization algorithms. For reducing balance amortization, installments are computed using the formula:
M = P × [ r(1 + r)^n ] / [ (1 + r)^n – 1 ]
📚 Guias Relacionados
What Is APR? Annual Percentage Rate Explained Simply
Learn what APR (Annual Percentage Rate) means, how it includes both interest and compulsory fees, and why it is the true measure of borrowing cost.
Simple (Flat) Interest Explained: Formula and Calculation
Learn how flat simple interest is calculated on the original principal and why a 5% flat rate is equivalent to nearly a 9% to 10% effective APR.
Reducing Balance Interest Explained: Why It Is Fairer for Borrowers
Understand how reducing balance interest charges interest strictly on remaining debt, ensuring you only pay for money you currently hold.
Todos os valores são estimativas matemáticas com fins educativos. Os termos reais dos credores podem variar.
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