{"id":4324,"date":"2018-05-23T03:20:33","date_gmt":"2018-05-22T21:50:33","guid":{"rendered":"https:\/\/www.antworksmoney.com\/blog\/?page_id=4324"},"modified":"2018-05-23T03:20:33","modified_gmt":"2018-05-22T21:50:33","slug":"reducing-balance-loan-calculator","status":"publish","type":"page","link":"https:\/\/www.antworksmoney.com\/blog\/reducing-balance-loan-calculator\/","title":{"rendered":"Reducing Balance Loan Calculator"},"content":{"rendered":"

The Reducing Balance Method is mainly used to calculate the total interest for housing or mortgage property loans wherein the interest to be paid by the customer is calculated based on the outstanding loan amount after periodic repayments. Being the preferred option compared to the Fixed Interest Rate, Reducing Balance Rate or the Diminishing Rate is used to calculate the interest amount for overdraft facilities and credit cards as well. This method is beneficial to the customers since they have to pay less amount of interest as the loan tenure progresses considering that the interest is calculated based on the outstanding principal loan amount. In this method, the interest decreases after each monthly installment is paid since the remaining balance becomes lesser than the previous month with the payment of each EMI. The depreciation rate percentage is applied on reducing balance of asset.<\/p>\n

The formula for the Reducing Balance Method can be represented as,<\/p>\n

Amount of interest for each installment = Applicable rate of interest * Remaining loan amount<\/strong><\/em><\/p>\n

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Advantages of the Reducing Balance Method<\/h2>\n

There are numerous significant advantages to the Reducing Balance Method. Learn about the advantages of the<\/p>\n