{"id":5480,"date":"2019-03-22T09:04:00","date_gmt":"2019-03-22T09:04:00","guid":{"rendered":"\/blog\/?p=5480"},"modified":"2025-01-29T15:46:06","modified_gmt":"2025-01-29T10:16:06","slug":"when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/","title":{"rendered":"When borrowing, know the difference between Reducing Balance Rate vs. Flat Rate Loans"},"content":{"rendered":"\n<p>There\nare two varieties of most loans. Loans with flat interest rate and ones with\nreducing balance interest rate. Now lenders might or might not offer this\nchoice to borrowers. But if you were given a choice between the two, which one\nwill you choose?<\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"https:\/\/tata-blog.osian.dev\/personal-loan.html\">Know More About Personal Loan<\/a><\/div>\n\n\n\n<p>If\nyou know the difference between the two, then there is not much to tell you\nhere. But if you don\u2019t, we use a small example to help clear the difference.<\/p>\n\n\n\n<p>A\nloan having flat rate of interest is one where interest remain constant\nthroughout the loan tenure. Suppose you take a loan of Rs 10 lac at 8% for 3\nyears. Now the interest amount every year will be fixed at 8% of the \u2018original\u2019\nprinciple, i.e. Rs 10 lac &#8211; which works out to be Rs 80,000. And this is\nirrespective of the fact that you are repaying a part of the outstanding\nprinciple every year.<\/p>\n\n\n\n<p>Reducing balance loans are other option. Here the interest is fixed at 8% (like in above example) but not on the original outstanding principle. This is logical as your outstanding principle is reducing every year. So interest is calculated on the reduced outstanding amount every year. As you would have rightly guessed, this naturally leads to lower interest charges during the full <a href=\"https:\/\/tata-blog.osian.dev\/personal-loan.html\" title=\"Personal Loan\">personal loan<\/a> tenure. <\/p>\n\n\n\n<p>So for the same given interest rates, going for a reducing balance Interest rate makes more sense. But that is obviously if you are given a choice. Also, if the two loans on offer also have different rate of interests, then you need to do some mathematics to arrive at the right answer. But simply speaking, the reducing balance EMI seems a better option, as the interest is charged only one the outstanding principle amount.<\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"https:\/\/tata-blog.osian.dev\/online\/loans\/personal-loans\/apply-now-personal-loan#!\">Apply for Personal Loan<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>There are two varieties of most loans. Loans with flat interest rate and ones with reducing balance interest rate.<\/p>\n<p><a href=\"https:\/\/tata-blog.osian.dev\/blog\/personal-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":5482,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[24],"tags":[],"class_list":["post-5480","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-use-loan"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.13 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>When borrowing, know the difference between Reducing Balance Rate vs. Flat Rate Loans - TATA Capital Blog<\/title>\n<meta name=\"description\" content=\"Reducing balance loans that charge interest on the outstanding principal and flat-rate loans that charge on the original principal. Know its differences at Tata Capital.\" \/>\n<meta name=\"robots\" content=\"noindex, nofollow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"When borrowing, know the difference between Reducing Balance Rate vs. Flat Rate Loans - TATA Capital Blog\" \/>\n<meta property=\"og:description\" content=\"Reducing balance loans that charge interest on the outstanding principal and flat-rate loans that charge on the original principal. Know its differences at Tata Capital.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/\" \/>\n<meta property=\"og:site_name\" content=\"TATA Capital Blog\" \/>\n<meta property=\"article:published_time\" content=\"2019-03-22T09:04:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-01-29T10:16:06+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.tatacapital.com\/blog\/wp-content\/uploads\/2020\/01\/reducing-balance-rate-vs.-flat-rate-loans.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"770\" \/>\n\t<meta property=\"og:image:height\" content=\"348\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Tata Capital\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Tata Capital\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/\",\"url\":\"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/\",\"name\":\"When borrowing, know the difference between Reducing Balance Rate vs. Flat Rate Loans - TATA Capital Blog\",\"isPartOf\":{\"@id\":\"https:\/\/www.tatacapital.com\/blog\/#website\"},\"datePublished\":\"2019-03-22T09:04:00+00:00\",\"dateModified\":\"2025-01-29T10:16:06+00:00\",\"author\":{\"@id\":\"https:\/\/www.tatacapital.com\/blog\/#\/schema\/person\/5ccf99347b9365e2fa68bd32006d0b4a\"},\"description\":\"Reducing balance loans that charge interest on the outstanding principal and flat-rate loans that charge on the original principal. Know its differences at Tata Capital.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.tatacapital.com\/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"When borrowing, know the difference between Reducing Balance Rate vs. Flat Rate Loans\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.tatacapital.com\/blog\/#website\",\"url\":\"https:\/\/www.tatacapital.com\/blog\/\",\"name\":\"TATA Capital Blog\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.tatacapital.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.tatacapital.com\/blog\/#\/schema\/person\/5ccf99347b9365e2fa68bd32006d0b4a\",\"name\":\"Tata Capital\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.tatacapital.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/a6a38ea7397ec3ff4a8dc9b854558dbfc2d1c417498effd79c6186d3edf6ae28?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/a6a38ea7397ec3ff4a8dc9b854558dbfc2d1c417498effd79c6186d3edf6ae28?s=96&d=mm&r=g\",\"caption\":\"Tata Capital\"},\"sameAs\":[\"https:\/\/tata-blog.osian.dev\/blog\"],\"url\":\"https:\/\/tata-blog.osian.dev\/blog\/author\/admin\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"When borrowing, know the difference between Reducing Balance Rate vs. Flat Rate Loans - TATA Capital Blog","description":"Reducing balance loans that charge interest on the outstanding principal and flat-rate loans that charge on the original principal. Know its differences at Tata Capital.","robots":{"index":"noindex","follow":"nofollow"},"og_locale":"en_US","og_type":"article","og_title":"When borrowing, know the difference between Reducing Balance Rate vs. Flat Rate Loans - TATA Capital Blog","og_description":"Reducing balance loans that charge interest on the outstanding principal and flat-rate loans that charge on the original principal. Know its differences at Tata Capital.","og_url":"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/","og_site_name":"TATA Capital Blog","article_published_time":"2019-03-22T09:04:00+00:00","article_modified_time":"2025-01-29T10:16:06+00:00","og_image":[{"width":770,"height":348,"url":"https:\/\/www.tatacapital.com\/blog\/wp-content\/uploads\/2020\/01\/reducing-balance-rate-vs.-flat-rate-loans.jpg","type":"image\/jpeg"}],"author":"Tata Capital","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Tata Capital","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/","url":"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/","name":"When borrowing, know the difference between Reducing Balance Rate vs. Flat Rate Loans - TATA Capital Blog","isPartOf":{"@id":"https:\/\/www.tatacapital.com\/blog\/#website"},"datePublished":"2019-03-22T09:04:00+00:00","dateModified":"2025-01-29T10:16:06+00:00","author":{"@id":"https:\/\/www.tatacapital.com\/blog\/#\/schema\/person\/5ccf99347b9365e2fa68bd32006d0b4a"},"description":"Reducing balance loans that charge interest on the outstanding principal and flat-rate loans that charge on the original principal. Know its differences at Tata Capital.","breadcrumb":{"@id":"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.tatacapital.com\/blog\/personal-use-loan\/when-borrowing-know-the-difference-between-reducing-balance-rate-vs-flat-rate-loans\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.tatacapital.com\/blog\/"},{"@type":"ListItem","position":2,"name":"When borrowing, know the difference between Reducing Balance Rate vs. Flat Rate Loans"}]},{"@type":"WebSite","@id":"https:\/\/www.tatacapital.com\/blog\/#website","url":"https:\/\/www.tatacapital.com\/blog\/","name":"TATA Capital Blog","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.tatacapital.com\/blog\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.tatacapital.com\/blog\/#\/schema\/person\/5ccf99347b9365e2fa68bd32006d0b4a","name":"Tata Capital","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.tatacapital.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/a6a38ea7397ec3ff4a8dc9b854558dbfc2d1c417498effd79c6186d3edf6ae28?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/a6a38ea7397ec3ff4a8dc9b854558dbfc2d1c417498effd79c6186d3edf6ae28?s=96&d=mm&r=g","caption":"Tata Capital"},"sameAs":["https:\/\/tata-blog.osian.dev\/blog"],"url":"https:\/\/tata-blog.osian.dev\/blog\/author\/admin\/"}]}},"featured_image_url":"https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/01\/reducing-balance-rate-vs.-flat-rate-loans.jpg","_links":{"self":[{"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/posts\/5480","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/comments?post=5480"}],"version-history":[{"count":5,"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/posts\/5480\/revisions"}],"predecessor-version":[{"id":37836,"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/posts\/5480\/revisions\/37836"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/media\/5482"}],"wp:attachment":[{"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/media?parent=5480"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/categories?post=5480"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tata-blog.osian.dev\/blog\/wp-json\/wp\/v2\/tags?post=5480"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}