When does principal start exceeding interest?

Typically around the midpoint of loan tenure. For a 20-year loan, it happens around year 10-11. Prepaying early shifts this crossover point earlier.

How to generate amortization schedule in Excel?

Use PPMT() for principal and IPMT() for interest. Or: Month 1 interest = Balance × Rate/12, Principal = EMI - Interest, New Balance = Balance - Principal. Copy down.

Loan Amortization Formula

Amortization shows how each loan payment splits between principal repayment and interest. In early years, most of your EMI goes toward interest.

Amortization Components

Interest = Outstanding × r | Principal = EMI - Interest

Where:

EMI = Fixed monthly payment
r = Monthly interest rate
Outstanding = Remaining loan balance

Step-by-Step:

1
Calculate EMI
EMI = P × r × (1+r)^n / ((1+r)^n - 1).
2
For each month: interest portion
Interest = Outstanding Balance × Monthly Rate.
3
Principal portion
Principal repaid = EMI - Interest. New balance = Old balance - Principal repaid.

Worked Examples:

Home loan amortization

Loan: ₹30LRate: 8%EMI: ₹25,093

Result: Month 1: ₹20,000 interest + ₹5,093 principal

Interest = 30L × (8%/12) = ₹20,000. Principal = 25,093 - 20,000 = ₹5,093. New balance = ₹29,94,907.