Calculator
Formula Used
Diminishing interest uses the current outstanding balance, not the original loan, for each new interest charge.
Monthly Rate (r) = Annual Interest Rate / 12 / 100
EMI = P × r × (1 + r)^n / ((1 + r)^n - 1)
Interest for Period = Current Balance × r
Principal for Period = EMI - Interest
Closing Balance = Opening Balance - Principal Paid
Total Interest = Sum of All Period Interest Values
Here, P is the principal, r is the monthly interest rate, and n is the total number of months. Extra payment lowers balance faster, which reduces future interest and shortens the payoff period.
How to Use This Calculator
- Enter the principal amount you want to finance.
- Add the annual interest rate charged by the lender.
- Enter the loan term and choose months or years.
- Optional: add extra monthly payment and setup fee.
- Pick the number of decimal places you prefer.
- Press the calculate button to view results.
- Review the summary cards, chart, and full schedule.
- Use the CSV or PDF buttons to export data.
Example Data Table
Example values below use principal 100,000, annual rate 10%, and 24 months. Extra payment and setup fee are both zero.
| Period | Opening Balance | Payment | Interest | Principal | Closing Balance |
|---|---|---|---|---|---|
| 1 | 100,000.00 | 4,614.49 | 833.33 | 3,781.16 | 96,218.84 |
| 2 | 96,218.84 | 4,614.49 | 801.82 | 3,812.67 | 92,406.17 |
| 3 | 92,406.17 | 4,614.49 | 770.05 | 3,844.44 | 88,561.73 |
| 4 | 88,561.73 | 4,614.49 | 738.01 | 3,876.48 | 84,685.25 |
| 5 | 84,685.25 | 4,614.49 | 705.71 | 3,908.78 | 80,776.47 |
Frequently Asked Questions
1) What is diminishing interest?
Diminishing interest is charged on the remaining loan balance. As you repay principal, the balance falls. Future interest becomes smaller because it is calculated on a lower amount.
2) How is it different from flat interest?
Flat interest is often based on the original loan amount throughout the term. Diminishing interest uses the current balance each period, so interest reduces over time and reflects repayment progress better.
3) Why does interest reduce every month?
Interest reduces because the unpaid balance reduces after each payment. Since the next period’s interest uses that smaller balance, the interest portion becomes lower while the principal portion becomes higher.
4) What does extra payment do?
Extra payment cuts the balance faster. That lowers future interest charges and usually shortens the full payoff period. Even small recurring extras can create meaningful savings over longer terms.
5) Can this calculator handle zero interest?
Yes. When the annual rate is zero, the calculator simply divides the principal by the loan term. Each payment goes fully toward principal, and total interest becomes zero.
6) What is included in total paid with fee?
Total paid with fee adds the one-time setup fee to the total loan payments. This helps you estimate the full cash outflow instead of only the scheduled loan repayments.
7) Why is the last payment sometimes smaller?
The final payment can be smaller because the remaining balance may not need a full standard installment. The calculator adjusts the last period so the balance closes cleanly without overpayment.
8) When is this calculator useful?
It is useful for loans, mortgages, auto financing, education plans, and any repayment structure using reducing balance interest. It helps compare costs, timing, and the effect of faster repayment.