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Loan Amortization Calculator

Calculate monthly loan EMI and view detailed period-by-period amortization schedules.

₹

Total borrowed loan principal

%

Fixed annual interest rate

Repayment period in years

Results

Monthly Payment (EMI)
₹21,002
Total Interest Payable₹2,60,112
Total Loan Repayment₹12,60,112
Original Principal₹10,00,000
Interest-to-Principal Ratio26.0%

Calculated using standard reducing-balance monthly amortization.

How loan amortization works

Loan amortization follows the reducing-balance (French amortization) methodology. Each fixed monthly installment (EMI) pays down both accrued interest and a portion of the outstanding principal balance:

1. Periodic Monthly Rate: r = Annual Interest Rate (%) ÷ 12 ÷ 100

2. Total Payment Installments: n = Loan Tenure (Years) × 12

3. Monthly Installment (EMI): EMI = [ P × r × (1 + r)n ] ÷ [ (1 + r)n − 1 ]

4. Period Accrued Interest: Interestt = Outstanding Balancet−1 × r

5. Period Principal Repayment: Principalt = EMI − Interestt

6. Ending Balance: Balancet = Balancet−1 − Principalt

Step-by-Step Worked Example (Default Scenario)

Consider a personal or vehicle loan of ₹10,00,000 borrowed at an annual reducing rate of 9.50% over a 5-year term (60 monthly payments):

Period / MilestoneAmortization MathComputed ValueBalance Dynamics
Disbursed Principal (P)Starting Borrowed Capital₹10,00,000Opening balance on Day 1 upon loan disbursement.
Monthly Payment (EMI)Formula (r=0.79167%, n=60)₹21,002 / MonthConstant installment due every month for 60 consecutive months.
Month 1 BreakdownInterest: ₹10L × 0.79167% = ₹7,917
Principal: ₹21,002 − ₹7,917 = ₹13,085		37.7% Interest / 62.3% PrincipalBalance reduces to ₹9,86,915, lowering Month 2 interest to ₹7,813.
Year 1 CumulativeMonths 1 to 12 Summation₹1,64,517 Principal / ₹87,505 InterestOutstanding balance drops to ₹8,35,483 after 12 payments.
Year 3 (Month 36) MidpointBalance: ₹4,53,607
Interest: ₹3,591 / Principal: ₹17,411		17.1% Interest / 82.9% PrincipalNotice how principal portion expands as interest burden shrinks!
Total Principal RepaidOriginal Principal₹10,00,000 (79.4%)Complete retirement of debt obligation.
Total Interest Payable(₹21,002 × 60) − ₹10,00,000₹2,60,112 (20.6%)Cost of borrowing over 5 full years.
Total Amount RepaidPrincipal + Total Interest₹12,60,112Total cash paid to lender across 60 monthly installments.

Reducing Balance vs Flat Interest Rate Trap

Borrowers often encounter deceptively marketed "flat rate" financing:

  • Reducing Balance (Real 9.50%): Total interest is ₹2,60,112 because interest is charged only on remaining debt.
  • Flat Rate (Advertised 9.50%): Interest is charged on the initial ₹10L for all 5 years: ₹10L × 9.5% × 5 = ₹4,75,000 in interest!
  • A "9.5% Flat Rate" carries an effective reducing-balance APR of nearly 17.5% — costing an extra ₹2,14,888 in disguised interest!

The Power of Principal Prepayment

Prepaying principal early delivers exponential compound interest savings:

  • Prepayment Timing: A ₹1,00,000 lump sum paid in Month 12 eliminates 7 full months from your 5-year loan and saves over ₹42,000 in interest.
  • The "Front-Loaded Interest" Reality: Lenders don't front-load interest maliciously; interest is simply highest when your debt balance is highest.
  • Every rupee of early prepayment permanently reduces the balance that future interest is computed upon.

Assumptions & Real-World Limitations

  • Uniform Repayment Dates: The schedule assumes installments occur on the exact same calendar date each month (30/360 or actual/365 convention). Irregular payment dates slightly alter daily interest accrual.
  • Floating vs Fixed Benchmarks: On floating-rate loans, benchmark interest changes adjust your remaining loan tenure or monthly EMI, recalculating the entire future amortization trajectory.
  • Ancillary Lending Charges: Loan origination fees, processing fees (typically 0.5% to 2%), stamp taxes, and prepayment penalties (if applicable to fixed retail loans) are excluded from the pure amortization schedule.
Want to master the math behind your monthly payment?Read our step-by-step breakdown on How Loan Amortization Works: Principal vs. Interest Split and the True Cost of Front-Loaded Debt to see monthly ledger formulas, balance reduction curves, and prepay velocity models.

Frequently asked questions

What is a loan amortization schedule?
A loan amortization schedule is a complete table of periodic loan payments showing how each payment is partitioned between interest charges and principal reduction, along with the remaining balance after each payment.
Why is interest higher in early loan payments?
Interest is calculated on the remaining loan principal. Since the principal is largest at the beginning of the loan, the interest charge is at its peak. As you repay principal, monthly interest charges decline, leaving more of each fixed EMI to repay principal.
What is the reducing-balance method?
Under the reducing-balance (or reducing-principal) method, interest is calculated strictly on the outstanding balance at each compounding period rather than the initial borrowing amount.
How do extra payments affect the amortization schedule?
Extra payments accelerate principal payoff, which reduces subsequent interest calculations for all future periods, shortening total loan duration and saving money.
Is the EMI amount identical every month?
For a fixed-rate loan, the total monthly EMI remains identical each month, but the internal split between principal and interest shifts continuously.

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Monthly Payment (EMI)

₹21,002