Loan Repayment Schedule: How an Amortisation Table Works

A loan repayment schedule is the month-by-month plan that shows exactly how a loan is paid off, and understanding it can change the way you judge a loan offer. When you first look at a loan, the monthly payment is usually the only number that stands out, but the schedule behind that payment tells a much richer story: how much of each payment goes to interest, how much reduces what you owe, and how quickly your balance actually falls. This guide explains a loan repayment schedule in plain language, works through the method step by step, and uses a real example so you can check your own loan with confidence. To see your own month-wise table in seconds, try our free Repayment Schedule Calculator.

Most borrowers are surprised by one thing when they first open a schedule: the early payments are mostly interest. That is not a trick by the lender; it is how a reducing-balance loan works. Interest is charged on the balance you still owe, so when the balance is at its highest, the interest charge is at its highest too. As the balance falls, the interest part shrinks and the principal part grows, even though the monthly payment itself stays the same. Once you see that pattern, it becomes much easier to understand why extra payments early in a loan can save so much interest later.

The Method / Formula

The schedule starts with the equated monthly instalment, or EMI. The standard formula is: EMI = P x r x (1 + r)^n / ((1 + r)^n – 1). Each symbol has a clear meaning. P is the principal, the amount you borrow. The letter r is the monthly interest rate, worked out by dividing the annual rate by 12 and then by 100. The letter n is the total number of monthly payments, so a five-year loan means 60 payments. The (1 + r)^n part accounts for interest being charged on a falling balance month after month, rather than on the original amount for the whole term.

Once the EMI is known, each row of the schedule follows the same three steps. First, work out that month’s interest: multiply the balance at the start of the month by the monthly rate r. Second, work out the principal part: subtract that interest from the EMI. Third, work out the new balance: subtract the principal part from the old balance. Repeat those steps for every month until the balance reaches zero. The EMI stays fixed, the interest part falls, the principal part rises, and the balance falls faster as time goes on.

Two totals complete the picture. Total interest is the sum of the interest column, and total payment is the EMI multiplied by the number of months, which should also equal the principal plus total interest. Checking those totals is a quick way to spot whether a schedule makes sense: if the total payment is far above the amount borrowed, that difference is the price of borrowing over the full term, and a shorter term or a lower rate will bring it down.

How to Read a Loan Repayment Schedule Step by Step

1. Write down the loan amount, the annual interest rate and the tenure in years, then convert the rate to a monthly rate and the tenure to months.
2. Work out the EMI with the formula above, keeping extra decimal places until the final step so rounding does not distort the schedule.
3. For month one, multiply the opening balance by the monthly rate to get the interest, then subtract it from the EMI to get the principal part.
4. Subtract the principal part from the opening balance to get the closing balance, and carry that balance into the next month.
5. Repeat the same three calculations every month, watching the interest fall, the principal rise and the balance fall, until the final payment clears it.
6. Add up the interest column and compare total payment with the amount borrowed, so you can see the full cost of the loan before you commit.

Reading the table this way also helps you test changes. A small extra payment in the early years cuts the balance that later interest is charged on, so it can shorten the loan or reduce later payments. A longer tenure, by contrast, lowers the EMI but adds many more months of interest, which is why the cheapest monthly payment is not always the cheapest loan overall.

Worked Example

Take a loan of Rs 5,00,000 at 9% interest per year for 5 years, the example used by the tool page. First convert the inputs: the monthly rate is 9 / 12 / 100 = 0.0075, and the tenure is 5 x 12 = 60 monthly payments. Applying the EMI formula gives an EMI of Rs 10,379.18 per month.

Now build month one. Interest for the first month is Rs 5,00,000 x 0.0075 = Rs 3,750.00. The principal part is therefore Rs 10,379.18 – Rs 3,750.00 = Rs 6,629.18, and the balance after month one falls to Rs 5,00,000 – Rs 6,629.18 = Rs 4,93,370.82. In month two, interest is charged on that lower balance, so it is slightly less than Rs 3,750, and a slightly larger share of the same EMI goes to principal.

Over the full 60 months, the same pattern continues until the balance reaches zero. The total payment is Rs 6,22,750.80, and the total interest is Rs 1,22,750.80. In other words, borrowing Rs 5,00,000 at 9% for five years costs Rs 1,22,750.80 in interest on top of the amount borrowed, a figure that is easy to miss if you only look at the monthly payment.

Common Mistakes / Good to Know

• Using the annual rate as the monthly rate: always divide by 12 and by 100 before using r, or the interest and EMI will be far too high.
• Expecting an equal split every month: the split changes every month, with interest heavy at the start and principal heavy at the end.
• Ignoring the final payment: banks often round the EMI to whole rupees and adjust the last instalment by a few rupees, so the last row may differ slightly from a textbook schedule.
• Forgetting fees and rate changes: processing charges, insurance and a floating rate sit outside the basic schedule, so treat the table as an estimate for a fixed-rate, reducing-balance loan and check your lender’s statement for the exact figures.

Frequently Asked Questions

Once you can read a schedule, use our Loan EMI Calculator to check a new loan, and read How to Calculate EMI for the formula behind the payment.