Published on Sept 2, 2025Updated on Sept 3, 2026
When you take out a loan, whether it's a personal loan, business loan, or a two-wheeler loan, you’re committing to a regular monthly payment structure. But do you know precisely how much of your payment goes towards interest and how much brings down your actual loan balance each month? This is where amortisation schedules come in.
Understanding the concept of loan amortisation, the mechanics behind the schedule, and how the amortisation formula works is essential for effective money management and smart financial planning.
In this comprehensive article, we’ll break down how amortisation works, the steps to create an amortisation table, and show why every borrower should make use of this tool and reliable online calculators.
Related Read: What is a Loan Repayment Schedule & Why Is It Important?
An amortisation schedule is a detailed table that lays out each loan payment over the duration of a fixed-term loan, showing how much goes toward principal and interest, and the resulting reduction in your loan balance after every payment.
With each instalment, the portion allocated to interest decreases, while the part applied toward the principal increases. This gradual repayment of the principal is the essence of loan balance reduction. The entire process is known as loan amortisation.
This schedule is especially useful when availing of credit products such as a personal loan, as it offers borrowers a clear picture of their repayment journey – making personal budgeting and financial planning more manageable.
Loan amortisation refers to spreading out your repayments across the tenure so that each instalment covers the interest accrued for that period plus a portion of the principal.
At the beginning of the loan tenure, a larger share of the EMI goes toward interest due to the higher outstanding balance. As time progresses and more of the principal is repaid, the interest portion of each EMI gradually decreases, while the principal portion increases.
The standard formula for calculating your monthly payment (EMI) on a loan is as follows:
EMI = P × [r(1+r)^n ÷ ((1+r)^n − 1)]
Where:
Each month:
This cycle repeats throughout the loan tenure, eventually resulting in full repayment and a zero balance by the end of the schedule.
You can use a personal loan EMI calculator to quickly estimate your monthly repayment. Many reputable lenders also provide a corresponding amortisation schedule for greater clarity.
Suppose you take a personal loan of INR 10 lakhs over a tenure of 60 months. Let’s assume the personal loan interest rate to be 12.5% per annum.
Using the calculator, the monthly EMI works out to approximately INR 22,244.
Now, here’s what the amortisation schedule would typically look like for the first 5 months:
|
Month |
Opening Principal Outstanding (INR) |
Interest Paid (INR) |
Principal Repaid (INR) |
Resulting Principal Outstanding (INR) |
|
1 |
10,00,000 |
10,000 |
12,244 |
9,87,756 |
|
2 |
9,87,756 |
9,878 |
12,366 |
9,75,390 |
|
3 |
9,75,390 |
9,754 |
12,490 |
9,62,899 |
|
4 |
9,62,899 |
9,629 |
12,615 |
9,50,284 |
|
5 |
9,50,284 |
9,503 |
12,741 |
9,37,543 |
Disclaimer: The above calculation table and graph are for illustrative purposes only. Actual payments may vary depending on several factors, including the lender’s policy at the time of loan application.
A standard amortisation schedule or table generally includes the following elements:
Using a loan amortisation schedule offers multiple benefits:
Understanding your amortisation schedule is key to efficient money management, allowing you to make precise calculations, plan strategic prepayments, and maintain better control over your loan journey.
Tools such as a personal loan eligibility calculator can further simplify your financial planning by giving you a clearer picture of what to expect.
For those seeking financial support for personal or business goals, SMFG India Credit offers hassle-free personal loans of up to INR 10 Lakhs*. Check your personal loan eligibility and apply online today to avail of competitive interest rates and flexible repayment tenures.
Important Note: This article is for general informational purposes only and may be subject to change from time to time. As product features, eligibility criteria, interest rates, charges, fees, tenures and other terms may be revised as per SMFG India Credit's policies, readers are advised to refer to the latest details from the respective product pages (please select from the top menu). For the latest loan charges, please visit Charges & Fees Link and for the latest Interest rates, please visit Interest Rate Rationale. Please note that final loan terms, disbursement process and eligibility criteria will depend on SMFG India Credit's policies at the time of loan application.
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An amortisation schedule is a table that details each periodic loan payment, showing how much goes toward principal and interest, along with the remaining loan balance over the loan’s tenure.
To build an amortisation schedule, enter the loan amount, interest rate, loan tenure, and payment frequency into the standard EMI formula. Then, calculate the principal and interest portions for each payment and list them month by month until the balance reaches zero. You can also use an online EMI calculator for faster results.
First, use the standard EMI formula:
EMI = P × [r(1+r)^n ÷ ((1+r)^n − 1)]
where EMI is the equal monthly instalment, P is the principal, r is the monthly interest rate, and n is the loan tenure in months.
Each payment’s principal and interest components can then be calculated using this EMI, and the remaining loan balance is updated accordingly for each period. Using an EMI calculator simplifies this process significantly.
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