Loan Calculator: Payment, Principal, Tenure & Rate — Reducing vs Flat Interest Explained
1) What this calculator does
This page lets you calculate any of the four core loan variables—payment, principal, tenure, or interest rate—while also generating a full month-by-month amortization schedule. Toggle the method between reducing-balance and flat interest. Add optional prepayments (every month and/or one time) to see how much time and interest you can save.
2) Reducing-balance vs flat interest
Most bank loans are calculated on a reducing balance. Interest is charged on the outstanding balance after each payment, so the interest component shrinks over time. Flat interest, by contrast, is based on the original principal for the whole term. Flat looks simple but usually costs more; compare the total interest fields when in doubt.
3) Formulas & intuition
For reducing balance, the payment formula equalizes the present value of payments and the amount borrowed. If the monthly rate r is zero, payment is simply P/n. Solving for P or n uses direct algebra. Solving for the rate requires numerical methods—the calculator uses a robust bisection approach that works for everyday scenarios.
4) Prepayments and how they save interest
Prepaying reduces how long you keep a balance, and therefore reduces interest. This tool keeps the payment constant and reduces the number of months. Prepaying earlier in the schedule saves you more than prepaying later.
5) Reading the amortization schedule
Each row shows the payment for that month, how much went to interest vs principal, any extra you added, and the remaining balance. If you provide a start date, you’ll also see real calendar dates. Download the CSV to audit or archive your plan.
6) Common mistakes & lender quirks
- Comparing flat to reducing rates directly—always compare totals or effective APR.
- Ignoring lender rounding rules—minor differences are normal; the final payment adjusts.
- Assuming prepayments always reduce EMI—many lenders default to tenure reduction.
7) Step-by-step examples
- Solve payment: Choose Reducing, enter principal, rate, and tenure → Calculate.
- Solve principal: Enter target payment, rate, and tenure → Calculate.
- Solve tenure: Enter principal, rate, and payment → Calculate (rounds up to full months).
- Solve rate: Enter principal, tenure, and payment → Calculate (uses numerical solving).