Loan and EMI Calculator with amortisation breakdown
Monthly payment, total interest and a first-year schedule showing how little early payments touch the principal.
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This calculates an equated monthly instalment on a reducing-balance basis — the method banks use for mortgages, car finance and most business loans. Every payment is the same size; what changes is the split between interest and principal.
Early payments are mostly interest. That surprises people, and it is the single most useful thing the schedule below reveals.
Enter the amount, the annual rate and the term. The result includes the first twelve payments broken down, so the split is visible rather than described.
Where the first year actually goes
Borrow 1,000,000 over 10 years at 14% annual interest.
Monthly payment 15,526.62
Number of payments 120
Total repaid 1,863,194
Total interest 863,194
Interest as % of principal 86.3%Nearly as much again in interest as the sum borrowed. Now the first three payments:
Month Payment Interest Principal Balance
1 15,526.62 11,666.67 3,859.95 996,140
2 15,526.62 11,621.64 3,904.98 992,235
3 15,526.62 11,576.08 3,950.54 988,285In month one, 75% of the payment is interest. After a full year of payments totalling 186,319, the balance has fallen by only about 49,000.
This is not a trick — it is what reducing-balance interest means. Interest is charged on the outstanding balance, which starts at its highest. As the balance falls the interest portion shrinks and the principal portion grows, slowly at first and then faster. The crossover, where principal exceeds interest, comes past the halfway point of the term on a loan at this rate.
The practical consequence: early overpayments are worth far more than late ones. An extra 10,000 paid in month three removes that amount from the balance for the remaining 117 months of interest charges. The same 10,000 paid in year nine saves almost nothing.
The formula
EMI = P × r × (1+r)ⁿ / ((1+r)ⁿ − 1)Where P is principal, r is the monthly rate (annual ÷ 12 ÷ 100) and n is the number of months.
It derives from the present value of an annuity — the payment amount whose discounted total equals the amount borrowed.
Rate quoted is not rate paid
The advertised rate rarely reflects the true cost. Watch for:
Processing and arrangement fees. Often 1–2% deducted upfront, so you receive less than you borrowed while repaying the full amount.
Flat versus reducing balance. A "flat rate" charges interest on the original principal for the whole term, regardless of what you have repaid. A 10% flat rate is roughly equivalent to 18–19% reducing balance. This is the most misleading figure in consumer lending, and it is entirely legal.
Mandatory insurance bundled into the loan.
Prepayment penalties, which remove the main lever you have for reducing total interest.
Ask for the APR, which is required to fold most of these in.
Term length trades payment against total cost
Same 1,000,000 at 14%:
- 5 years: 23,268/month, 396,000 total interest
- 10 years: 15,527/month, 863,000 total interest
- 20 years: 12,435/month, 1,984,000 total interest
Doubling the term from 10 to 20 years cuts the monthly payment by around 20% and more than doubles the interest. The long term looks affordable per month and is enormously more expensive overall.
Overpayment mechanics
When you overpay, ask which the lender does: reduce the term (keeping payments the same) or reduce the payment (keeping the term). Term reduction saves far more interest. Many lenders default to payment reduction unless you specify.
Check also that overpayments are applied to principal on receipt rather than held until the next scheduled date.
Frequently asked questions
Why is so much of my early payment interest?
Interest is charged on the outstanding balance, which is at its highest at the start. As the balance falls, the interest portion shrinks and the principal portion grows. On a long loan at a moderate rate, the point where principal exceeds interest arrives past the halfway mark of the term.
What is the difference between flat and reducing-balance interest?
Flat rate charges interest on the original amount for the entire term regardless of repayments made. Reducing balance charges only on what remains outstanding. A 10% flat rate costs roughly what an 18 to 19% reducing-balance rate costs — always ask which one a quote refers to.
Does this include fees and insurance?
No. It calculates repayment on the principal and rate you enter. Processing fees, arrangement charges, mandatory insurance and late penalties all sit outside it. Ask the lender for the APR, which is required to incorporate most of these.
Is it better to overpay early or late?
Early, by a wide margin. An overpayment removes that amount from the balance for every remaining month of interest charges, so the earlier it lands the more interest it avoids. Also ask whether your lender applies overpayments to reduce the term or the payment — reducing the term saves considerably more.
Why does a longer term cost so much more?
The monthly payment falls, but you pay interest on a slowly-reducing balance for far longer. Doubling a term from 10 to 20 years typically cuts the payment by around a fifth while more than doubling total interest. Long terms look affordable monthly and are much more expensive overall.
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