Loan markup calculator

In Pakistan, markup is the price of a loan, the extra amount you pay on top of what you borrowed. It is what other countries call interest. Islamic banks use the word profit or markup for the same thing, since the deal is built as a sale or a partnership and not as a loan with interest.

Most banks use the reducing balance method. Each month the markup is the yearly rate divided by 12, multiplied by what you still owe. The instalment stays the same, so early instalments are mostly markup and later ones mostly principal. The instalment is P x r / (1 − (1 + r)^−n), where P is the loan, r the monthly rate and n the number of months. Some lenders instead quote a flat rate, which charges the markup on the full amount for the whole term.

A flat rate charges markup on the original loan until the last instalment, even though you have been paying the loan down. So 10% flat for a year is about 18% a year on a reducing balance. The calculator shows both side by side for your numbers. Always ask the lender which one the quoted rate is.

KIBOR is the Karachi Interbank Offered Rate, the rate banks lend to each other at. Many business loans are priced as KIBOR plus a spread, for example 6-month KIBOR plus 3%. On September 22, 2026 the State Bank of Pakistan published 6-month KIBOR at 11.72% bid and 11.97% offer, and 12-month KIBOR at 11.85% bid and 12.35% offer (sbp.org.pk, KIBOR rates, checked October 3, 2026). Loans are normally priced off the offer rate. KIBOR changes every working day, so open sbp.org.pk for today’s figure and type it into the KIBOR box.

The State Bank of Pakistan kept its policy rate at 11.5% at the Monetary Policy Committee meeting of September 14, 2026 (Radio Pakistan and The Nation, checked October 3, 2026). KIBOR follows the policy rate closely, which is why loan rates move when the policy rate does.

It is the scheme formerly known as Kamyab Jawan, run by the Prime Minister’s Youth Programme through commercial, Islamic and SME banks. The official site, pmybals.pmyp.gov.pk (checked October 3, 2026), lists three tiers. Up to Rs 500,000 carries 0% markup, above Rs 500,000 up to Rs 1.5 million carries 5%, and above Rs 1.5 million up to Rs 7.5 million carries 7%. Applicants are Pakistani residents aged 21–45, or 18 for IT and e-commerce businesses, and applications are online only. The site does not state the repayment period or whether the rate is flat or reducing, so those boxes stay editable. Confirm both with the bank before you sign.

Yes. The State Bank runs refinance and credit guarantee schemes for small and medium enterprises, which banks use to lend to small businesses at a lower rate. Sectors, limits and rates differ by scheme and change over time, so we have not filled any in. See the SME incentive schemes page on sbp.org.pk and ask your bank which one fits your business.

In a murabaha the bank buys the item you need and sells it to you at cost plus an agreed profit, which you pay in instalments. The profit is fixed up front. In a musharakah the bank and you put money into the business together and share the profit, and you buy out the bank’s share over time. Islamic banks usually quote the profit as a yearly rate, so this calculator still works as a guide. Ask for the full schedule in writing.

During a grace period you pay only the markup and the loan balance does not fall, so the instalment after it is larger and the total markup is higher. A processing fee is taken up front, so you receive less than you borrowed but repay the full amount. Both raise the effective annual rate, which is why that figure can be above the rate the bank quoted.

No. This is an estimate from the numbers you type in. Banks may add insurance, taxes, late fees or different day counts, and variable rates can change during the loan. Your bank’s offer letter and repayment schedule are what count. Check them before you borrow.