What is an Amortization Schedule?
An Amortization Schedule is a complete table detailing each periodic payment on a loan (like a home loan or car loan). While your monthly EMI (Equated Monthly Installment) remains constant, the schedule shows exactly what portion of each payment goes toward the principal and what portion goes toward interest.
How It Changes Over Time
On day one of your loan, your outstanding principal is at its highest. Therefore, the bank charges the highest amount of interest in your first EMI.
As you gradually pay down the principal over the months and years, the interest component of your EMI decreases, and the principal repayment share naturally increases. By the final years of your loan, your EMI consists almost entirely of principal repayment.
Because the interest burden is heaviest in the early years of a loan, making lump-sum prepayments in the first 1-3 years reduces your total interest cost significantly more than making the same prepayment later on.