Two offers on the desk
A smaller payment can cost more overall
Compare a fictional 12,000 loan at 6% per year on a reducing balance. Only the term changes. Values below use the calculator’s own schedule engine and are in the same currency units as the principal.
24 months
531.85 / month
Interest: 764.34
Total repaid: 12764.34
48 months
281.82 / month
Interest: 1527.38
Total repaid: 13527.38
Match the settings before comparing
Select Reducing balance, Per year, and a term in months to reproduce these examples. The tool also supports a flat add-on rate, which charges interest on the original principal throughout the term. A 6% flat rate is not equivalent to a 6% reducing-balance rate.
Check Per month versus Per year carefully. For a nominal annual rate, this calculator divides by 12 to obtain a monthly rate; it does not treat a monthly rate as an annual percentage. The currency picker changes presentation, not the amount through an exchange rate.
| Month | Principal | Interest | Balance |
|---|---|---|---|
| 1 | 471.85 | 60.00 | 11528.15 |
| 2 | 474.21 | 57.64 | 11053.95 |
Read the falling balance
In the first month, interest is 12,000 × 0.06 ÷ 12 = 60. The rest of the payment reduces principal. The second month starts with a smaller balance, so less of the same payment goes toward interest. Open the full schedule above to follow this through the term.
Flat-rate schedules behave differently: the monthly interest amount stays tied to the original principal. At zero interest, the principal is simply spread across the monthly payments. Displayed amounts are rounded; lender rounding and payment dates can produce small differences.
Use whole months within the tool’s 600-month cap and compare like-for-like assumptions. Your entries and schedule are calculated locally; keep your own copy if you need to discuss the estimate with a lender.