The amortization schedule breaks the month-wise calculation of principal and interest amount you will be paying in the form of your EMIs. In simple words, with each month’s EMI, the share of interest and the principal amount keeps changing, while the former keeps on reducing the later keep on increasing. That’s why if you decide to prepay your loan in the first few years you will find out that you have paid a very small proportion of the principal sum. Let us understand this better with the help of an illustration.
Illustration: How to read an amortization schedule
Suppose you borrow a Loan Against Property of ₹ 10 Lakh from Axis Bank for 5 years at an interest rate of 10.50%, the EMI calculated for this loan amount would be ₹ 21,494 and the total annual EMIs to be paid annually is ₹ 2,57,927. The Axis Bank Loan Against Property EMI schedule for 5 years is explained below in the table –
Amortization Schedule for a Loan Against Property of ₹ 10 Lakh over the 5 years
| Year | Interest paid during the year | Principal repaid during the year | Total amount paid during the year (Interest + Principal) | Outstanding Principal |
|---|---|---|---|---|
| 2020 | ₹ 25,914 | ₹ 38,567 | ₹ 64,482 | ₹ 9,61,433 |
| 2021 | ₹ 93,171 | ₹ 1,64,756 | ₹ 2,57,927 | ₹ 7,96,677 |
| 2022 | ₹ 75,015 | ₹ 1,82,912 | ₹ 2,57,927 | ₹ 6,13,765 |
| 2023 | ₹ 54,857 | ₹ 2,03,070 | ₹ 2,57,927 | ₹ 4,10,695 |
| 2024 | ₹ 32,478 | ₹ 2,25,449 | ₹ 2,57,927 | ₹ 1,85,246 |
| 2025 | ₹ 8,199 | ₹ 1,85,246 | ₹ 1,93,445 | ₹ 0 |
Each Axis Bank Loan Against Property EMI consists of both amounts of interest as well as the principal repaid. The interest component of EMI goes down while the principal component goes up in both cases while doing the calculation.
As you assess the amortization table, you will find that by the end of 1st year 62.23% of your EMI has been used to repay the principal amount. This means that the remaining 37.77% of the EMI went into interest payment. Thus, you end up paying only 16.05% of the loan amount of ₹ 10 Lakh after paying 12 EMIs in the first year to Axis Bank.
In year 5, the interest component of Axis Bank EMI is around 5.46%, while the principal component is around 94.54%. Upto 5 years, you have cumulatively repaid 100% of your total Axis Bank Loan Against Property.
After the announcement of RBI on 22nd May 2020, Axis Bank has extended the loan moratorium for the term loans and interest of working capital loans to next three months till August 2020. As a borrower, you have the option to opt-in or opt-out of the moratorium by informing Axis Bank. The interest will continue to accrue on the principal outstanding during this moratorium and the accumulated interest would be added to the principal amount resulting in the extension of loan tenure except in cases where the tenure extension is not possible will increase EMI amount. The moratorium on payment of Loan Against Property EMI’s will not be treated as default and will not have any negative impact on the borrower’s credit score. To know more about the moratorium option, you may contact Axis Bank customer care or its nearest branch.