How to use this calculator
Enter the amount you want to borrow, the interest rate from the offer and the term in months, then choose whether the rate is quoted as reducing balance or flat. The monthly instalment, total interest and total repayment update as you type. If the offer is quoted as a flat rate, the calculator also shows the reducing-balance rate it is really equivalent to, which is the fair way to compare it with other offers.
What is the difference between a flat rate and a reducing rate?
A reducing rate charges interest only on the balance you still owe, so the interest part of each payment shrinks as you repay. A flat rate charges interest on the original amount for the whole term, even though you are paying it down every month. The same headline number therefore costs much more on a flat basis. Always ask a lender which basis a rate is quoted on before comparing offers.
| AED 500,000 over 48 months | Monthly instalment | Total interest |
|---|---|---|
| 6% reducing | AED 11,742.51 | AED 63,641 |
| 6% flat | AED 12,916.67 | AED 120,000 |
In this example the 6% flat offer is equivalent to a reducing rate of about 10.97% a year. You can check any offer the same way by switching the calculator to "Flat".
How is the monthly instalment calculated?
For a reducing-balance loan the instalment is P x r x (1 + r)n / ((1 + r)n - 1), where P is the loan amount, r is the annual rate divided by 12 (as a decimal) and n is the number of months. For a flat-rate loan, total interest is P x annual rate x years, and the instalment is the loan amount plus that interest, divided by the number of months.
What the calculator does not include
- Processing or arrangement fees, which lenders often charge up front or deduct from the amount paid out
- Life, credit or asset insurance that some facilities require
- Early settlement fees if you repay before the end of the term
- VAT on fees, and any late payment charges
Ask for the full fee schedule with any offer. Fees can change which offer is cheaper, especially on shorter terms.
Have an offer and not sure it is a good one?
Ask a Fintrust advisor →Frequently asked questions
A reducing rate charges interest only on the balance still owed, while a flat rate charges interest on the original amount for the whole term. On AED 500,000 over 48 months, 6% reducing costs AED 63,641 in interest and 6% flat costs AED 120,000, so a flat rate is roughly equivalent to a much higher reducing rate.
For a reducing-balance loan, the monthly instalment is P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the amount borrowed, r is the monthly rate and n is the number of months. For a flat-rate loan, total interest is the amount x annual rate x years, spread evenly across the months.
No. It shows the interest cost only. Processing fees, insurance, early settlement fees and VAT on fees are extra, so ask each lender for its full fee schedule before comparing offers.
Yes. The maths is the same for business and personal loans. Enter the amount, the rate from the offer, whether it is flat or reducing, and the term in months.
This calculator is for illustration only and is not a lending offer. Actual instalments depend on the lender's terms, fees and repayment schedule.
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