Take an outstanding debt of Rs 500,000 at a 24% annual markup, with a Rs 25,000 monthly payment. The
monthly markup rate is 24% divided by 12, which is 2% a month. In month one the markup is 2% of
Rs 500,000, or Rs 10,000, so Rs 15,000 of your Rs 25,000 payment goes to principal. As the balance
falls, the markup portion shrinks and more of each payment clears principal, so the debt is gone in
about 26 months. Across those months you pay roughly Rs 144,936 in markup, making the total repaid
about Rs 644,936 on the original Rs 500,000. Raising the monthly payment would clear it faster and
cost less markup, because the balance carrying the markup falls more quickly.
Item
Value
Outstanding balance
Rs 500,000
Annual markup rate
24%
Monthly payment
Rs 25,000
Time to clear
26 months
Total markup paid
Rs 144,936
Total repaid
Rs 644,936
How it is calculated
The tool runs a month-by-month amortization. Each month it charges markup at the annual rate divided
by twelve on the outstanding balance, adds that to the balance, then deducts your fixed monthly
payment, repeating until the balance hits zero. It counts those months and totals the markup charged.
A safeguard checks the first month first, if your payment does not cover even one month of markup, the
balance can never fall, so the tool reports that the debt never clears and prompts a higher payment.
Total repaid is the starting balance plus all the markup paid. Because markup is charged on the
reducing balance, the share of each payment going to principal rises over time, and any extra you can
add to the monthly payment compounds into a meaningfully shorter payoff and lower total cost.
Frequently asked questions
How long will it take to pay off my debt?
Each month markup is charged on the outstanding balance, and whatever is left of your payment reduces the principal. The smaller your payment relative to the markup, the longer it takes and the more markup you pay. If your monthly payment does not even cover the first month of markup, the balance never falls, which this tool flags.
Why does paying just a little more each month make such a big difference?
Because all extra payment goes directly to principal, every rupee above the minimum reduces the balance that the next month calculates markup on. That lower balance carries less markup, so more of the following payment again goes to principal, compounding your progress. On a PKR 500,000 debt at 24% annual markup, adding PKR 5,000 to the monthly payment can cut both the repayment timeline and the total markup by a meaningful margin.
What is the difference between markup and interest for debt in Pakistan?
Conventional banks charge interest on loans, while Islamic or Shariah-compliant banks use markup structures such as Murabaha or Diminishing Musharakah, where the bank adds a fixed profit to the price rather than charging a percentage of outstanding principal in the same way. Economically the monthly payment logic is similar for many consumer products, but the contracts and FBR treatment differ. This calculator uses the term markup and applies a reducing-balance method, which suits most consumer instalment products.
What if my debt has multiple accounts at different rates?
This tool handles one balance at a time. For multiple debts, either tackle the highest-rate balance first (avalanche method) or the smallest balance first (snowball method). The avalanche approach minimises total markup paid. Enter each balance separately to compare how much markup each will cost and which should be prioritised for extra payments.