Calculate Your Monthly Personal Loan Installment (SAR)

One lender quotes SAR 1,800 a month; another quotes SAR 2,100 for the same amount and term. The obvious reason is the profit rate — but the hidden factor most people miss is the calculation method. There are two main methods: reducing balance and flat rate.

**Monthly installment = (Principal + Total Profit) ÷ Number of Months**

**Total Profit = Principal × Annual Profit Rate × Number of Years**

Quick example: SAR 60,000 over 2 years at 15% flat

• Total Profit = 60,000 × 15% × 2 = SAR 18,000

• Total Repayment = SAR 78,000

• Monthly Installment = 78,000 ÷ 24 = **SAR 3,250**

**Setup**: SAR 50,000 financing, 36 months, 17% advertised rate

### Flat Rate calculation:

• Total Profit = 50,000 × 17% × 3 = SAR 25,500

• Total Repayment = SAR 75,500

• Monthly Installment = 75,500 ÷ 36 = **SAR 2,097**

### Reducing Balance (same 17% rate):

• Monthly Installment = **SAR 1,782**

• Total extra cost: SAR 14,152

**Takeaway**: 17% flat costs you SAR 11,348 more than 17% reducing. Always ask: is this rate flat or reducing?

**Setup**: SAR 100,000 financing, 60 months, 14% reducing balance

Monthly rate = 14% ÷ 12 = 1.167%

Monthly Installment = **SAR 2,327**

Total Repayment = SAR 139,620

Total Financing Cost = SAR 39,620

**SAMA check** — is the installment within 33% of your salary?

• 33% × 12,000 = SAR 3,960

• SAR 2,327 < SAR 3,960 → Application passes initial screening

**Note**: Any existing obligation (credit card, car loan) is added — the combined total must stay below 33%.

**1. "Installments starting from..."**

Advertisers show the best-case scenario — longest term, highest amount, cleanest credit file. Your actual installment may vary significantly.

**2. "Interest-free"**

No financing in Saudi Arabia is cost-free. 'Interest-free' means Islamic profit is embedded in the product price. Always ask for the total repayment figure.

**3. Advertised rate vs. actual APR**

A bank like Al Rajhi or SNB may advertise 15% reducing, but after insurance and admin fees the effective rate rises to 17-18%. Request the full amortization schedule before signing.

**4. Extending the term to lower the installment**

36-month term: SAR 2,097/month. 60-month term: SAR 1,450/month. The lower installment looks better, but you pay SAR 87,000 instead of SAR 75,500. Choose the shortest term you can afford.

**5. Tamam, Emkan, and digital lenders — read the fine print**

Digital platforms like Tamam and Emkan advertise attractive numbers. Always verify the calculation method and additional fees before accepting.

**Can I repay early?**

Yes, but some lenders charge an early settlement fee. SAMA caps this fee — ask before signing.

**How do I know if the rate is flat or reducing?**

Ask directly and request a copy of the contract. Any SAMA-approved contract must explicitly state the calculation method.

**Does the 33% cap include all my obligations?**

Yes. SAMA's 33.33% cap for employees covers all monthly commitments: personal loans, credit cards, and car installments combined.

**What if one lender rejects me?**

One rejection is not a general rejection. Every provider has different criteria — Lendo, Raqamyah, Tamam, Emkan, and others all apply different standards.

Now that you understand the formula and know what to look for, the next step is comparing real offers. Diro gives you a transparent comparison from 60+ SAMA-licensed providers — checking your offer is free and does not affect your SIMAH record.

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