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Loans

What is Amortisation?

Updated 20 August 2026

The gradual process of paying off a loan through regular instalments, where each payment covers interest plus a shrinking or growing share of principal.

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Amortisation describes the gradual process by which a loan gets paid off over time through regular instalments, where each payment is split between interest and principal repayment. Even though your EMI amount usually stays the same every month, the split between how much goes to interest versus principal keeps shifting as the loan progresses.

Early in the loan's life, your outstanding balance is largest, so more of each EMI goes toward interest on that large balance, with only a small portion chipping away at the principal. As the outstanding balance shrinks over the years, less interest accrues, so a growing share of each EMI goes toward principal instead. An amortisation schedule is simply a table laying out this month-by-month or year-by-year breakdown for the entire loan tenure, which is useful for understanding how prepayments could save you interest.