Personal loan calculator
Enter the amount, rate and period to see your monthly instalment, total interest and the true cost of a flat rate.
How the instalment is calculated
Flat: monthly = P × (1 + rate × years) ÷ months
Reducing: monthly = P × r ÷ (1 − (1 + r)^−n), where r = rate ÷ 12 and n = months
Many banks in the Gulf advertise personal loans with a flat rate, which looks lower than the reducing rates used in many other countries. Because flat interest is charged on the full amount for the whole term, a flat rate costs roughly 1.8 to 1.9 times as much as the same number on a reducing basis. When you choose flat, the calculator also shows the equivalent reducing rate, so you can compare offers fairly.
Worked examples
| Loan | Monthly | Total interest |
|---|---|---|
| 100,000 at 4% flat, 5 years | 2,000 | 20,000 |
| 100,000 at 6% reducing, 5 years | 1,933.28 | 15,996.81 |
| 60,000 at 0%, 5 years | 1,000 | 0 |
Example 1: a flat-rate offer
A bank offers AED 100,000 at 4% flat over 5 years. Interest is 100,000 × 4% × 5 = 20,000, so you repay 120,000 over 60 months: AED 2,000 a month. That is about 7.42% on a reducing basis.
Example 2: a reducing-rate offer
Another bank offers 6% on a reducing balance. The instalment is 1,933.28 a month and total interest is about 16,000, so it is cheaper than the 4% flat offer.
Example 3: an interest-free employer loan
An employer lends 60,000 at 0% over 5 years. Each instalment is simply 60,000 ÷ 60 = 1,000.
Example 4: the same loan over different terms
100,000 at 4% flat costs 3,111.11 a month over 3 years (12,000 interest), 2,416.67 over 4 years (16,000 interest) and 2,000 over 5 years (20,000 interest). Each extra year lowers the instalment but adds 4,000 in interest.
Example 5: adding a one-off fee
A 50,000 loan at 5% flat over 3 years costs 1,597.22 a month and 7,500 in interest. If the bank also charges a one-off fee of, say, 500, the real cost of borrowing is 8,000. Always add the fees to the interest when you compare offers.
Flat rate to reducing rate: quick table
Equivalent reducing-balance rate for common flat rates, worked out with the same formula the calculator uses:
| Flat rate | 1 year | 3 years | 5 years |
|---|---|---|---|
| 3% | 5.49% | 5.68% | 5.64% |
| 4% | 7.30% | 7.51% | 7.42% |
| 5% | 9.10% | 9.31% | 9.15% |
| 6% | 10.90% | 11.08% | 10.85% |
The equivalent rate is close to the annual percentage rate (APR) a bank must disclose, but the APR can be higher because it also includes fees.
Before you sign a personal loan
- Ask whether the rate is flat or reducing, and ask for the APR and the total amount you will repay.
- List every fee: processing fee, life or credit insurance, and any charge for late payment.
- Check the salary transfer condition. Many Gulf loans require your salary to be paid into the lending bank. Ask what happens if you change jobs.
- Ask about early settlement: how the bank works out the amount you owe if you repay early, and what fee applies.
- Check affordability. Banks look at how much of your salary already goes to other debts, under limits set by each country's central bank.
How much can you borrow?
Banks cap the share of your salary that can go to repayments: 50% of gross salary in the UAE, and 33.33% for salary-deduction finance in Saudi Arabia, with credit card limits counted too. Use the DBR and maximum loan calculator to see how much room you have and the largest loan that fits.
Common mistakes
- Comparing a flat rate with a reducing rate. Convert first; the calculator shows the equivalent.
- Ignoring fees. Processing fees and insurance can add a lot. Ask for the APR.
- Looking only at the instalment. A longer term lowers the instalment but raises the total cost.
- Assuming early settlement saves all the remaining interest. Ask the bank for a settlement letter showing the exact amount.
- Taking a top-up loan without checking the new total. A top-up usually restarts the term, so you may pay interest for longer.
Frequently asked questions
What is the difference between a flat rate and a reducing rate?
A flat rate charges interest on the original amount for the whole term, even as you pay it down. A reducing rate charges interest only on what you still owe. The same number costs much more as a flat rate.
Is a 4% flat rate the same as 4% reducing?
No. Over 5 years, a 4% flat rate costs about the same as 7.4% on a reducing balance. The calculator shows this equivalent rate whenever you choose flat.
Does this work for Islamic financing?
Yes for the instalment. Islamic personal finance (such as murabaha or tawarruq) quotes a profit rate instead of interest, usually on a flat basis, and the monthly payment is calculated the same way.
Are fees included?
No. Processing fees, insurance and early settlement charges are extra. Ask the bank for the total cost and the annual percentage rate (APR).
How much can I borrow?
Banks limit the share of your salary that can go to repayments: 50% of gross salary in the UAE and 33.33% for salary-deduction finance in Saudi Arabia. Our DBR calculator works out the largest loan that fits.
What is the APR?
The annual percentage rate shows the yearly cost of the loan on a reducing basis, including most fees. It is the fairest single number for comparing offers from different banks.
Can I repay my loan early?
Usually yes, but a settlement fee may apply, and the rules differ by country and bank. Ask your bank for a settlement letter showing the exact amount due.
Results are estimates and exclude fees. Your bank's offer, rounding and insurance can change the figures. This is not financial advice.
Method: standard amortisation formula for reducing-balance loans and the flat-rate method used by many Gulf banks.