How to Read a Loan Amortization Schedule

An amortization schedule is a table showing every payment you’ll make over the life of your loan. Most borrowers never look at it. That’s a mistake, because this table reveals exactly how much of your money goes to the bank versus how much actually pays off your debt.

The Columns

A standard amortization schedule has five columns:

Month	EMI	Principal	Interest	Balance
1	43,391	7,974	35,417	49,92,026
2	43,391	8,031	35,360	49,83,995
…	…	…	…	…
240	43,391	43,087	304	0

(Example: 50L loan, 8.5%, 20 years)

Month: The payment number
EMI: Your fixed monthly payment (stays constant)
Principal: The portion reducing your actual debt
Interest: The portion going to the bank as profit
Balance: What you still owe after this payment

The Key Insight: The Interest-Principal Flip

In month 1, out of a 43,391 EMI, only 7,974 goes to principal. The bank takes 35,417 as interest. That’s 82% of your payment going to the bank.

By month 120 (halfway through), the split is roughly 50-50.

By month 240, almost the entire EMI is principal, and the interest is just 304.

This curve is why the early years of a loan are the most expensive years to hold debt, and the best time to make prepayments.

How to Use This for Prepayments

Every rupee of prepayment you make reduces the principal balance. This means less interest is calculated next month, which means more of your regular EMI goes toward principal, which further reduces the balance. It’s a virtuous cycle.

A prepayment in year 1 saves you far more than the same prepayment in year 15, because it eliminates interest that would have compounded for the remaining 19 years.

What to Look For

Total interest paid: Add up the interest column. Compare it to your principal. On a 20-year home loan at 8.5%, you’ll pay more in interest than you borrowed.
The crossover point: Find the month where principal exceeds interest. This is when your payments start working harder for you than for the bank.
Prepayment impact: If you can afford extra payments in the first 5 years, the schedule shows you exactly how many months you’ll shave off.

The Schedule Doesn’t Lie

Marketing can make a 9% loan sound cheap. The amortization schedule shows you what cheap actually costs over 20 years. Generate one for your own loan and look at the total interest row. That number is the real price of your loan.