Loan EMI Calculator

The EMI formula explained

An EMI (equated monthly instalment) is the fixed amount you pay each month on a reducing-balance loan. This calculator uses the standard formula:

EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)

• P is the loan amount (the principal).
• r is the monthly interest rate: the annual rate ÷ 12 ÷ 100.
• n is the number of monthly payments.

Worked example: Rs 1,000,000 at 12% for 5 years

Here P = 1,000,000, r = 12 ÷ 12 ÷ 100 = 0.01, and n = 60. The formula gives an EMI of Rs 22,244.45. Over 60 payments you repay Rs 1,334,666.86, so the loan costs Rs 334,666.86 in interest.

Each payment covers the month's interest first, and the rest reduces your balance. That is why more of each payment goes towards the principal as time passes:

The calculator shows this as a year-by-year summary, and the CSV download gives every month, which you can open in Excel or Google Sheets.

How the interest rate changes your payment

Small rate differences add up over a long loan. This table shows a Rs 2,500,000 loan repaid over five years:

Moving from 12% to 16% adds about Rs 5,184 to each payment and about Rs 311,000 to the total cost of the loan. This is why comparing several lenders is worthwhile, even when their rates look close.

How the loan term changes the total cost

A longer term lowers the monthly payment but raises the total interest, often by far more than people expect:

On the Rs 5,000,000 loan, the extra five years cut the payment by Rs 4,411 a month but add nearly Rs 2.94 million of interest. If you can comfortably afford the shorter term, it usually costs much less overall.

Flat rate and reducing balance

Always ask which method a quoted rate uses, because the same percentage can mean very different costs. On Rs 1,000,000 at 12% for five years:

• Reducing balance: interest is charged on what you still owe. Total interest is Rs 334,667, with an EMI of Rs 22,244.
• Flat rate: interest is charged on the original amount for the whole term. Total interest is 1,000,000 × 12% × 5 = Rs 600,000, with an EMI of about Rs 26,667.

This calculator handles reducing-balance loans only. If a lender quotes a flat rate, ask for the equivalent reducing-balance rate or APR so you can compare it fairly. Our article on comparing flat-rate and reducing-balance loans shows how to convert one to the other.

Paying extra to finish early

Extra payments reduce your balance sooner, so less interest builds up. On the Rs 1,000,000 example, paying Rs 5,000 more each month would clear the loan in 46 months rather than 60, saving about Rs 82,000 in interest. This calculator does not model extra payments, so the example was worked out separately.

Before you pay early, ask whether your lender charges a prepayment or early settlement fee, as this can reduce the saving.

Loans in Pakistan: what to check

• Floating rates: many bank loans are priced at KIBOR plus a margin, so your rate can reset. This tool assumes one rate for the whole term, so run it again at a higher rate to test whether you could still afford the payment.
• Fees: processing fees, insurance and other charges can add to the real cost but are not part of the EMI shown here.
• Car and home finance: enter the amount you are actually borrowing, which is the price minus your down payment.
• Islamic financing: products such as diminishing musharakah are structured differently from conventional loans, so treat these results as a rough comparison and use the provider's schedule for exact figures.

Before you sign

A common rule of thumb is to keep all your loan payments below about 30–40% of your take-home pay, though lenders set their own limits and your own budget matters more. The Salary Calculator can help you estimate your take-home pay. Ask your lender for a written repayment schedule too, and compare it with the CSV from this tool. Any large gap usually points to fees, a different interest method or different payment dates.