EMI calculator
Monthly payment
Rs 22,244
Total interest over the term
Rs 334,667
Total paid to the lender
Rs 1,334,667
How the instalment is worked out
- The annual rate is divided by twelve to get a monthly rate, and the term in years is multiplied by twelve to count instalments.
- Payment = principal × monthly rate × (1 + monthly rate)^instalments, divided by ((1 + monthly rate)^instalments − 1).
- This is the reducing-balance method. Part of every instalment is that month's interest on what is still owed, and the rest cuts the principal back. The amount stays the same each month; the split inside it does not.
- At a zero rate the same calculation simply divides the principal by the number of instalments, because there is no interest component left to solve for.
One worked example: Rs 1,000,000 at 12% for five years
Monthly rate1%
Instalments60
Monthly paymentRs 22,244
Interest inside the first paymentRs 10,000
Principal inside the first paymentRs 12,244
Total paid to the lenderRs 1,334,667
Total interestRs 334,667
What this figure does not cover
- The rate is held fixed for the whole term. Most Pakistani housing and car finance is linked to the lender's own rate setting, so when that moves the instalment moves too.
- Processing fees, insurance, tax deducted at source and early-settlement charges are not included.
- Banks round instalments their own way, often to the nearest rupee or ten rupees, and a final instalment can differ by a small amount.
- It is not the flat-rate figure some advertisements quote. On the same loan a straight 12% for five years would name Rs 600,000 of interest; reducing balance charges Rs 334,667 instead.
Questions people ask about this number
Why is the total interest lower than rate × years × principal?
Interest is charged each month on the balance still owed, not on the amount first advanced. As the principal is paid back, the interest portion shrinks, so the real cost falls below the flat-rate figure.
What happens if I stretch the term?
The monthly payment drops while the total interest rises, because the balance attracts interest across more months. A longer term is cheaper to carry and dearer to finish.
Is this the instalment my bank will charge?
No. It is the same formula most lenders apply, run on the figures you enter. Confirm the actual schedule with the lender before relying on it.
Actual EMI may vary by bank. Confirm with your lender.