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Amortization schedule
How EMI is calculated
EMI (Equated Monthly Installment) is a fixed payment made by a borrower to a lender each month. It includes both principal repayment and interest, calculated so that the loan is fully repaid by the end of the tenure.
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
P = Principal loan amount
r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
n = Loan tenure in months
Principal vs interest breakdown
In the early months of a loan, a larger share of each EMI goes toward interest. As the outstanding principal decreases, the interest component shrinks and the principal component grows. This is called an amortizing loan. The amortization schedule below shows this breakdown month by month.
Tips to reduce total interest
Making a larger down payment reduces the principal and therefore total interest paid. Choosing a shorter tenure increases monthly EMI but significantly reduces total interest cost. Even one extra EMI per year (prepayment) can shorten your loan by 2–3 years. Compare loans using this tool to find the optimal balance between affordable monthly payments and lowest total cost.
Frequently asked questions
EMI stands for Equated Monthly Installment — the fixed monthly payment you make to repay a loan. Each EMI covers both principal and interest. Early payments are interest-heavy; later payments are mostly principal repayment.
EMI = P × r × (1+r)^n / ((1+r)^n - 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the tenure in months. This is the reducing balance method used by most banks.
A longer tenure gives lower monthly EMI but much higher total interest. A shorter tenure means higher EMI but significantly lower total cost. If you can afford it, a shorter tenure always saves money. Use this tool to see the exact difference.
Flat rate calculates interest on the full original principal throughout the tenure. Reducing balance calculates interest only on the outstanding principal each month, which decreases over time. Reducing balance results in lower total interest and is the standard method used by most banks.
Most banks allow a maximum EMI of 40–50% of your monthly net income. If your monthly salary is PKR 100,000, your maximum EMI should be around PKR 40,000–50,000. Use this calculator to find which loan amount and tenure keeps your EMI within that range.
Home loan rates in Pakistan typically range from 18% to 24% per annum depending on the bank, tenure, and borrower profile. Rates fluctuate with the State Bank of Pakistan policy rate. Compare multiple bank rates using this tool to find the best deal.