Amortization Calculator

In the early months of any standard fixed-rate loan, the outstanding balance is at its largest, so the interest charge on that balance is also at its largest — meaning most of your fixed payment covers interest, with only a small remainder reducing the principal.

As months pass and the balance gradually shrinks, the interest charge shrinks along with it, so a growing share of each identical payment goes toward principal instead. By the final months of the loan, almost the entire payment reduces principal, since very little interest remains to be charged on the small remaining balance.

Enter your loan principal in PKR, the annual interest rate, and the term in years. The calculator generates a preview table showing, for roughly the first year or two of the schedule (or the full schedule if the loan is shorter), the interest portion, principal portion, and remaining balance for each month.

Compare the interest paid in month one against the interest paid in month twelve of the same loan to see concretely how much the split has already shifted after just a single year — this comparison is one of the most eye-opening exercises for anyone taking their first long-term loan.

Each month's interest charge equals the current outstanding balance multiplied by the monthly interest rate (the annual rate divided by 12). The principal portion of that month's payment is simply the fixed total payment minus that month's interest charge. The new balance carried forward is the previous balance minus that month's principal portion.

This process repeats every month until the balance reaches zero at the end of the term, which is guaranteed by construction because the fixed payment amount itself was originally calculated using the standard EMI amortization formula to hit exactly zero at the final installment.

Suppose you borrow PKR 3,000,000 at 14% annual interest over a 15-year (180-month) term, giving a monthly payment of roughly PKR 39,900. In month one, the interest charge is approximately PKR 3,000,000 x (0.14/12), or about PKR 35,000 — meaning only around PKR 4,900 of that first payment actually reduces the principal.

By month twelve, the outstanding balance has fallen only slightly, so the interest charge is still close to PKR 34,300, with about PKR 5,600 going toward principal. It typically takes many years on a long-tenure loan like this before the principal portion of the payment overtakes the interest portion — a pattern that surprises many first-time borrowers who assume repayment happens evenly across the whole term.

Any extra principal payment you make today reduces every single future interest charge on the loan, because interest is always calculated on the current outstanding balance — a smaller balance permanently means smaller future interest, for every remaining month of the term.

This preview does not assume any prepayment. If you do make an extra payment, ask your bank for a revised schedule, or approximate the effect yourself by rerunning this calculator with the lower remaining balance and the number of months actually left on your loan.

Refinancing into a new loan effectively resets this whole clock — you start again near the "mostly interest" end of a fresh schedule — so refinancing only clearly pays off if the new rate savings outweigh restarting the amortization curve, especially if you refinance late in an existing loan's term.

If you have not yet settled on a loan amount, rate, or term, start with the Loan Calculator or Mortgage Calculator to find your monthly payment first, then return to this page to see exactly how that specific payment would be split month by month. For a shorter, general installment loan, the same amortization logic applies via the Payment Calculator.

If you are weighing whether extra principal payments are worth it compared with investing that same money elsewhere, compare the interest saved here against the potential growth shown by the Investment Calculator or Compound Interest Calculator for the same rupee amount.