Amortization
Amortization is the process of paying off a loan through regular instalments, where each payment covers that month's interest first and reduces the principal with the rest.
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When a loan is amortized, every EMI does two jobs at once: it pays the interest charged on the balance that month, and it uses whatever is left to chip away at the principal. Because interest is charged on the outstanding balance — which is largest at the start — early instalments are mostly interest and barely touch the principal. As the balance shrinks, the split tilts the other way, until the final EMIs are almost all principal.
An amortization schedule is the month-by-month table of this split: opening balance, interest, principal repaid and closing balance for every instalment. It’s the single most useful view of a loan, because it shows exactly where your money goes.
Worked example. On a ₹10,00,000 loan at 9% for 10 years, the EMI is about ₹12,668. In month one, interest is ₹10,00,000 × 0.0075 = ₹7,500, so only ₹5,168 reduces the principal. By the final year almost the whole ₹12,668 is principal. This front-loading of interest is exactly why prepaying early saves so much.
You can generate the full schedule for any loan with the EMI calculator, or read the deep dive on what an amortization schedule is.