Loan Calculator

How to use the loan calculator

Enter the amount you want to borrow, the annual interest rate and the term, in years or months (switching the unit converts the number for you). Then choose how the lender quotes the rate. Pick Reducing balance for an ordinary interest rate or APR — the way most mortgages and many bank loans are priced. Pick Flat rate when the offer says “flat”, which is common for car loans and personal loans in the UAE and elsewhere in the Gulf. The monthly payment, totals, working and payoff schedule update as you type, and the comparison table shows what the same number would cost if it were quoted the other way.

The calculator is currency-neutral — use dirhams, riyals, dollars or anything else, as long as you stick to one currency. Your numbers are saved in the page address so you can bookmark or share them, and nothing is sent anywhere.

The formulas

For a reducing-balance loan with equal monthly payments (the EMI):

M = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)

where P is the amount borrowed, r is the monthly rate (annual rate ÷ 100 ÷ 12) and n is the number of monthly payments. Each month’s interest is the outstanding balance × r; the rest of the payment reduces the balance. At 0% the payment is simply P ÷ n.

For a flat-rate loan, interest is worked out once, on the original amount, and split evenly:

Interest = P × flat rate × years Installment = (P + Interest) ÷ n

To compare it fairly, the calculator finds the monthly rate i at which an ordinary reducing-balance loan would have exactly the same installment — the solution of P = M × (1 − (1 + i)^−n) ÷ i — and reports 12 × i as the equivalent APR. That equation has no general closed-form solution, so it is solved numerically (Newton’s method with a bisection fallback) to far more precision than the two decimals shown.

Worked example

You borrow 50,000 at 8% on a reducing balance for 4 years (n = 48). The monthly rate is r = 0.08 ÷ 12 ≈ 0.0066667 and (1 + r)^48 ≈ 1.3756661, so M = 50,000 × 0.0066667 × 1.3756661 ÷ 0.3756661 = 1,220.65 a month. Over 48 payments you repay 58,591.01, so the total interest is 8,591.01. The first payment is 333.33 interest and 887.31 principal; after the first year you still owe 38,953.02.

Now a dealer offers the same 50,000 over 4 years at 4% flat. Interest is 50,000 × 4% × 4 = 8,000, so each installment is 58,000 ÷ 48 = 1,208.33. Solving for the reducing-balance rate with the same installment gives i ≈ 0.622815% a month, or an APR of 7.47% (7.74% effective annual rate). The “4%” offer is almost as expensive as the 8% loan — it charges 8,000 of interest against 8,591.01 — even though its headline number is half as big.

Flat rate to APR: quick reference

Equivalent reducing-balance APR for common flat rates, with monthly installments. The result does not depend on the loan amount, only on the flat rate and the term.

Across these terms the true rate is roughly 1.8 to 1.9 times the flat rate. The reason is simple: with a flat rate you pay interest on the full amount for the whole term, but on average you owe only a little over half of it.

Loan rules in the UAE

The Central Bank of the UAE’s Regulation No. 29/2011 limits a personal loan to 20 times the borrower’s monthly salary or income, repaid over at most 48 months, and a car loan to 80% of the vehicle’s value over at most 60 months. All monthly repayments together should not exceed 50% of gross salary and other regular income (the debt burden ratio). The Central Bank’s guidance also says banks use the reducing-balance method for personal and car loans, and that a bank advertising a flat rate must show the equivalent effective rate side by side — the same comparison this calculator makes. Rules and bank practice change, so check the current rulebook and your lender’s key facts statement.

Tips and common mistakes

• Compare like with like. Convert every flat quote to its reducing-balance APR before comparing it with a bank’s reducing rate.
• A longer term lowers the payment but raises the cost. At 8%, stretching 50,000 from 4 to 5 years cuts the payment to 1,013.82 but raises total interest from 8,591.01 to 10,829.18.
• Fees are extra. Processing fees, insurance and early settlement charges are not in these figures.
• Rounding. Lenders round each installment to the smallest currency unit and adjust the last one, so their schedule can differ from this one by a few cents.

For a home purchase with a down payment, property tax and service charges, use the mortgage calculator. To see how the same monthly amount would grow if you saved it instead, try the compound interest calculator, and for questions about percentage points versus percent, the percentage calculator. This page is a planning estimate, not financial advice.