Borrow Rs 1,000,000 over 3 years at a 22% annual markup. The monthly markup rate is 22% divided by
12, which is about 1.833% a month, spread over 36 months. The standard amortization formula gives a
level installment of about Rs 38,190. Over the full 36 months you repay roughly Rs 1,374,856, so the
total markup is about Rs 374,856 on a Rs 1,000,000 loan. In the early months most of each Rs 38,190
goes to markup and only a little to principal, but as the balance falls the split steadily reverses
so later installments mostly clear the principal. A shorter tenure raises the monthly payment but
cuts the total markup, because the balance is cleared faster.
Item
Amount (PKR)
Loan amount
Rs 1,000,000
Annual markup rate
22%
Tenure
36 months
Monthly installment
Rs 38,190
Total markup
Rs 374,856
Total repayable
Rs 1,374,856
How it is calculated
The calculator divides the annual markup rate by twelve to get the monthly rate, and multiplies the
tenure in years by twelve to get the number of installments. The level monthly installment uses the
standard amortization formula, where the payment equals the loan amount times the monthly rate,
divided by one minus one plus the monthly rate raised to the negative number of months. That single
payment repeats every month and keeps the balance falling on a fixed schedule. Total markup is the
sum of all installments minus the amount you borrowed, and total repayable is simply the installment
times the number of months. If the rate were zero, the tool falls back to dividing the loan evenly
across the months. Because markup accrues on the outstanding balance, paying off early or choosing a
shorter tenure always reduces the markup you pay.
Frequently asked questions
How is a personal loan installment calculated in Pakistan?
Banks use the standard amortization formula, where the monthly installment depends on the loan amount, the monthly markup rate, and the number of months. Early installments are mostly markup and later ones mostly principal. The total markup is the sum of all installments minus the amount borrowed.
What personal loan markup rates are typical in Pakistan?
Personal loan markup rates from Pakistani banks typically track the State Bank of Pakistan policy rate with a spread added for credit risk and processing costs. Rates can range widely from around 18% to 30% or more per year depending on the lender, your employer category, and your credit history. Islamic banks offer profit rates under a murabaha or diminishing musharakah structure that work differently from conventional markup but produce a comparable cost of borrowing.
Does paying off a personal loan early reduce the total markup in Pakistan?
Yes, because markup accrues on the outstanding principal balance. If you repay early, the remaining principal disappears and no further markup accrues on it, reducing the total cost. However, some Pakistani lenders charge an early settlement fee, so compare the fee against the markup saved before deciding. Check your loan agreement for the specific prepayment terms before proceeding.
What is the maximum personal loan tenure offered by Pakistani banks?
Most Pakistani banks offer personal loan tenures between one and five years, with some lenders extending to seven years for larger amounts or preferred customer categories. Longer tenures lower the monthly installment but significantly raise the total markup paid over the life of the loan. Choosing the shortest tenure your budget allows is the quickest way to reduce the markup shown by this calculator.