Amortization is the process of paying off a loan through equal monthly EMIs split between principal and interest. In month 1 of a ₹40 lakh, 8.50%, 20-year home loan, ₹28,333 goes to interest and only ₹6,380 reduces principal. By year 15 the split flips. This is why prepaying in years 1–5 saves disproportionately — you skip future months of interest-heavy payments.
About this calculator
An amortization calculator produces a detailed month-by-month table of every loan payment, showing the interest charged, principal repaid, and remaining balance for each installment. This is the most transparent view of how your loan actually works — and the most important document most borrowers never read.
In the early months of any loan, 70–85% of each EMI goes toward interest rather than reducing the principal. On a ₹40 lakh, 8.5%, 20-year home loan: in month 1, ₹28,333 goes to interest and only ₹6,380 reduces the principal. By year 15, the ratio flips: ~₹19,000 to interest, ₹15,700 to principal. This is the mathematical reason why prepaying a home loan in the first 5 years saves disproportionately more than prepaying in year 15.
The amortization schedule is also a verification tool. When you make a partial prepayment, request an updated schedule from your bank and verify that the outstanding balance matches your calculation. Banks occasionally make errors in applying prepayments — your schedule is the reference document.
Under RBI guidelines, all lenders must provide a loan amortization schedule on request at no charge. If your bank's loan portal doesn't show it, request it at your branch. The schedule is also used in Balance Transfer decisions — compare the remaining total interest on your current loan's schedule with the projected total interest on the new loan to find your gross saving.
Common uses
- View the complete month-by-month payment schedule for a home loan
- Identify how much interest you pay in the first year vs the last year
- Calculate the remaining balance after a specific number of payments
- Determine the impact of extra principal payments on remaining balance
- Prepare for loan refinancing by knowing your current balance
Frequently asked questions
What is loan amortization?
Amortization is the process of paying off a loan through scheduled, regular payments. Each payment covers the accrued interest first, with the remainder reducing the principal. Over time, the interest portion decreases and the principal portion increases, even though the total payment stays the same.
Why do I pay so much interest in the beginning of a loan?
Interest is charged on the outstanding principal balance. At the start of a loan, the balance is at its highest, so the interest charge is also at its highest. As you make payments and reduce the balance, the interest portion of each payment shrinks.
What is a negative amortization loan?
Negative amortization occurs when monthly payments are so small that they do not fully cover the interest due. The unpaid interest is added to the principal, causing the balance to grow over time instead of shrink. Most standard fixed-rate loans do not have negative amortization.