Loan EMI Calculator Pakistan 2024 | Monthly Installment

How Loan EMI is Calculated

EMI (Equated Monthly Installment) is a fixed monthly payment made to a lender on a specific date each month. It covers both the principal repayment and the interest accrued. **The EMI Formula:** EMI = P × r × (1+r)^n / ((1+r)^n - 1) Where: - P = Principal loan amount - r = Monthly interest rate (annual rate ÷ 12 ÷ 100) - n = Tenure in months **How interest is distributed:** In early months, the interest portion of EMI is high and principal repayment is low. Over time, as the outstanding balance reduces, the interest component decreases and principal repayment increases. This is called a "reducing balance" method. **Current rates in Pakistan (2024):** - SBP policy rate: reduced from 22% to ~13% by late 2024 - Home finance: 15–25% per annum - Car loans: 18–26% per annum - Personal loans: 20–30% per annum - Islamic finance (Meezan, Al-Baraka): comparable profit rates **Tips to minimize EMI cost:** 1. Larger down payment = lower principal = lower total interest 2. Shorter tenure = more interest saved (but higher monthly EMI) 3. Prepay when possible — even small lump sums cut future interest significantly 4. Compare Islamic vs conventional financing — profit rates vs interest rates