Example
A Rs 3,000,000 car with 30% down payment leaves a Rs 2,100,000 loan. At 21% for 5 years the instalment is about Rs 56,800 a month and total interest about Rs 1.31 million – which is why a larger down payment or shorter tenure saves a lot.
Tips before you borrow
- Compare the total cost (all instalments + processing fee + insurance), not only the rate.
- Ask whether the rate is fixed or KIBOR-linked and how often it resets.
- Check the early-settlement charge if you plan to repay early.
- Keep total instalments under about a third of your take-home pay – see the salary tax calculator for your net salary.
Frequently asked questions
How is the monthly instalment calculated?
Instalment = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r the monthly rate (annual rate ÷ 12) and n the number of months. Early instalments are mostly interest; later ones mostly repay principal.
What is KIBOR and why does my instalment change?
KIBOR (Karachi Interbank Offered Rate) is the benchmark most Pakistani banks price loans on. Variable-rate loans are reset to KIBOR plus a fixed spread every 6 or 12 months, so your instalment rises or falls when the State Bank changes the policy rate.
How much car loan can I get?
The State Bank sets limits on auto finance – a minimum down payment (30% in recent years), a maximum tenure, a cap on the loan amount and a ceiling on instalments as a share of income. These limits change, so confirm the current ones with your bank.
Do Islamic banks charge interest?
Islamic banks use Ijarah (lease) or Diminishing Musharakah instead of interest, but the monthly rental is also benchmarked to KIBOR, so the calculator gives a close estimate of the payment.
Last reviewed: October 2026