Everyone has desires but many desires are costly. Fulfilling them sometimes compels us to take loans. However, loans should not be considered as a negative thing. In fact, loans are one of the best financial tools available to you. They are the perfect solution to multiple financial issues that may cause you to worry. However, once you avail a loan, you are undoubtedly obliged to pay interests to repay the lender as well. So, in order to know the exact amount and we don’t make any mistakes, we have calculators for finding out the exact interest amounts. In this article, we will be discussing about reducing balance calculation method.

Reducing balance method

In reducing balance method, interest is not calculated on the total fix amount but on the remaining amount left after the payment of the instalment. The interest amount reduces after every payment. So, likewise one will have to pay less if the payments are clear and on time. One main thing which is often misunderstood is that the loan instalment amount remains the same every month and just the interest amount is changed depending on the reduced amount.

Why Paysense?

It becomes a little difficult to calculate this exact amount orally or on papers. So, in order to reduce the efforts, Paysense has come up with the best interest rate calculator for calculating the amount. Using Paysense calculator is easy. It allows you to calculate considering the two amounts. In EMI calculation formula, we need the decided interest rate of every instalment and the total amount left to be paid.

EMI = [P x R x (1+R)^N]/[(1+R)^N-1],Where:

P = Remaining loan amount,

R = Interest rate per month of every instalment,

N = Number of monthly instalments

Paysense calculator is the best as it gives the most accurate answer. The EMI calculation formula is dependent on the type of loan, but you will not have to do anything, the calculator will use the correct formula accordingly. So, next time you want to calculate your interest amount on your own, you can reply completely on our reducing balance interest rate calculator.