Loan Repayment Schedule

When you sign a loan agreement, you agree to repay the amount to the lender within a specified time along with interest. The amount is paid back in equal monthly installments (EMIs) over a pre-defined period. The EMI includes the principal amount, interest, and other small components such as insurance and service charge.

The loan repayment schedule is a schedule that specifies your payment amount every month throughout the loan period. It also details specific terms of the loan such as interest rate, due date, outstanding balance, etc.

Understanding the Loan Repayment Schedule

The loan repayment schedule comprises two major components of your EMI: the principal and interest amounts.

One might assume that the interest and principal components are equally divided in an EMI, but that is not true.

The interest component is much higher in the initial periods of the loan. This is because interest is calculated on the outstanding balance, which is initially very high. However, as the outstanding balance diminishes, so does the interest amount. Thus, the end of the schedule sees the principal amount covering most of the EMI.

Let’s understand this with the help of an example. Assume that you’ve taken a loan of Rs 10 lakhs on 1st April 2022, at an interest rate of 9%, to be repaid over ten years of tenure. Using an EMI calculator, your total payables will be as follows:

Loan Amount 10 lakhs
Interest Amount 9%
Tenure 10 years
Per Month EMI Rs 12,688
Total Interest Payable on the loan Rs 5,20,109
Total Payment (Principal +Interest) Rs 15,20,109

Now let’s look at the detailed repayment schedule for the year 2022 from April to December (i.e., the first year of the loan):

Month Principal Interest EMI Balance
April 5168 7500 12668 994832
May 5207 7461 12668 989625
June 5246 7422 12668 984379
July 5285 7383 12668 979094
August 5325 7343 12668 973769
September 5365 7303 12668 968404
October 5405 7263 12668 962999
November 5446 7222 12668 957553
December 5486 7182 12668 952067

As you can see, the interest is highest in the first month. This is because it is calculated on the entire balance of Rs 10 lakhs. But as the months pass, the interest amount decreases since they are calculated on the diminishing balance shown in the last column.

In the repayment schedule for the last year, 2032, you will find that the principal amount is much higher than the interest.

To see the full repayment schedule covering the entire tenure, use the PNB Housing home loan EMI calculatorEnter the loan amount, term, and interest rate, and a detailed schedule will pop on your screen.

Why is Loan Repayment Schedule Important?

Once you have understood how the repayment schedule works, it’s not hard to understand why this document holds much importance. Here are a few benefits the loan repayment schedule provides to the borrower:

  • It helps understand the repayment by breaking down the EMI into principal and interest components.
  • It allows borrowers to keep track of their loan repayment.
  • Enables borrowers to view the outstanding balance after each payment
  • If the borrower makes a payment more than the EMI, the updated repayment schedule will calculate the updated interest payable on the remaining balance.
  • A repayment schedule is beneficial for loans where part payments are acceptable, such as the mortgage loan.
  • The schedule helps identify the total interest paid annually for claiming income tax benefits.

To Conclude

A home loan is a big financial commitment. Hence, it’s crucial for anyone seeking a home loan to go through the repayment schedule first. You can generate the schedule online from your home using thePNB Housing home loan EMI calculator. The repayment schedule will enable you to estimate your expenses beforehand to make an informed financial decision.

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