How EMI is calculated
EMI (equated monthly instalment) is a fixed monthly payment that covers both interest and part of the loan. Early instalments are mostly interest. As the balance falls, a larger share of each instalment repays the loan itself.
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
P = loan amount, r = yearly rate ÷ 12 ÷ 100, n = number of months
Example
A car loan of Rs 3,000,000 at 14% a year for 5 years gives an EMI of about Rs 69,805 a month. Over 60 months you repay about Rs 4,188,285, of which about Rs 1,188,285 is interest.
Things to know before taking a loan in Pakistan
- Variable rates: most bank loans are linked to KIBOR plus a spread, so your rate and instalment can change when KIBOR changes. This calculator assumes a fixed rate.
- Islamic financing: Islamic banks use profit (murabaha, ijarah or diminishing musharakah) instead of interest, but the monthly rental works out in a similar way. Enter the profit rate in the rate box.
- Extra charges: processing fees, insurance and registration costs are usually added separately. Ask your bank for the full cost.
Check how much tax comes out of your salary before you commit to an instalment with the salary tax calculator.
Frequently asked questions
What is EMI?
EMI stands for equated monthly instalment. It is the fixed amount you pay every month until the loan is repaid.
How can I reduce my EMI?
Pay a larger down payment, choose a longer period, or get a lower rate. A longer period lowers the EMI but increases the total interest you pay.
Does this work for car ijarah and home financing?
Yes. Enter the financing amount, the yearly profit or rental rate and the period.
Why is my bank's instalment different?
Banks may add insurance, fees, or use a floating KIBOR-linked rate. This calculator uses a fixed rate with no extra charges.