How is the installment calculated?
Most banks in the Gulf use a flat profit rate. The profit is worked out once on the whole amount, for the whole period, even though you repay part of it every month:
- Profit = amount financed × flat rate × number of years.
- Monthly installment = (amount financed + profit − final payment) ÷ number of months.
- The APR is the real yearly cost: the rate that matches what you receive with what you pay back, including fees.
Because you are paying profit on money you have already returned, the APR of a flat-rate finance is close to twice the flat rate. Compare offers by their APR, which banks in Saudi Arabia must show you.
Worked examples
Personal finance of 100,000 at 4% flat for 5 years
Profit: 100,000 × 4% × 5 = 20,000. Installment: 120,000 ÷ 60 = 2,000 a month. With a 1% admin fee of 1,000, the APR is about 7.8%.
Car of 120,000, down payment 20,000, final payment 30,000, 3.5% flat for 5 years
Amount financed: 100,000. Profit: 100,000 × 3.5% × 5 = 17,500. Installment: (100,000 + 17,500 − 30,000) ÷ 60 = 1,458.33 a month, then 30,000 at the end.
Before you sign
- Compare offers by the APR and the total amount you will pay, not only the monthly installment.
- A longer period lowers the installment but raises the total profit.
- In Saudi Arabia, personal finance installments are usually limited to a third of your salary. In the UAE, all your monthly debt payments together must stay under half of your salary.
- Ask what you would pay to settle the finance early, and whether insurance is added to the installment.
Frequently asked questions
What is the difference between a flat rate and the APR?
A flat rate charges profit on the full amount for the whole period. The APR measures the real yearly cost on the balance you still owe, including fees. A 4% flat rate over 5 years is about 7.4% APR before fees.
Can I repay early?
Yes. In Saudi Arabia, if you settle a consumer finance early, the bank may usually charge only part of the remaining profit, not all of it. Ask your bank for an early settlement letter showing the exact amount.
Is murabaha different from a loan?
In a murabaha the bank buys the item and sells it to you at a known profit, paid in installments. For your budget, the installment works the same way as a flat-rate loan.
Why is the balloon payment risky?
It lowers the monthly installment but leaves a large amount to pay at the end. If you cannot pay it, you may have to refinance or sell the car.
Last reviewed: October 2026. This calculator gives an estimate; the bank’s offer and contract decide the final figures. Rules on fees and salary limits are set by the Saudi Central Bank and the Central Bank of the UAE.
This page was translated from Arabic. If something is unclear or wrong, please tell us.