When you take a loan from a bank or any other financial institution, you will have to repay it over a specific period, as mutually decided between you and the banking institution you are taking the loan from. Over this period, you have to repay not just your loan amount but also the interest that the bank will charge on it. Adding both the components together—the principal component and the interest component—will amount to the total amount of money you will have to pay back to the bank.

Now, this total amount is divided equally by the total number of months over which you have decided to repay the loan. This is called Equated Monthly Installments (EMI). While each of your personal loan EMIs is of the same amount, their principal and the interest components are not equal.

As a rule, in the initial stages of your EMI schedule, your interest component will be more than your principal component, but as time passes, this balance shifts, and while the interest component of your EMI gradually decreases the principal component increases. Many people find this to be a tricky issue, so here we have explained how to calculate the interest and principal component of your loan.

Since interest rates are calculated yearly, you should know how to calculate the principal and interest components separately for each month. There are many online loan EMI calculators you can use to do this, but let’s understand how you can do things manually.

You can also calculate components of EMIs for education loans, consumer durable loans, and EMIs against other loans using the following methods.

## How To Calculate Principal Amount From EMI Using Excel Sheet

If you are thinking about how to calculate principal and interest in EMI, you can do that for particular months using a simple excel sheet. Using an excel sheet is the simplest method to calculate EMI

Here’s how you can separate principal amount from EMI using an excel sheet:

Open an excel sheet or Google Sheet, and in any cell, type the below formula to get the principal and interest component in EMI of a particular month:

1. To get the principal component in a particular month type: =PPMT(I,x,n,-p)
2. To get the interest component in a particular month: =IPMT(I,x,n,-p)
3. Also, you can calculate your EMI by typing: =PMT (I,n,-p)

Where,

• ‘i’ is the monthly interest rate
• ‘x’ is the particular month for which you want to calculate principal and interest components. i.e., 1st month, 10th month, 23rd month, etc.
• ‘n’ is the loan tenure in months
• ‘p’ is the principal amount

Sample example:

Say the principal amount is Rs 10 lakh [p].

If the annual interest rate is 12 percent per annum, the monthly interest rate becomes 1 percent [i].

And tenure of the loan is 20 years or 240 months [n].

Then, EMI is: =PMT(0.01,240,-1000000), which comes to Rs. 11,011.

Also, the principal component of the EMI for the 10th month is =PPMT(0.01,10,240,-1000000), which comes to Rs. 1106.

And, the interest component is =IPMT(0.01,10,240,-1000000), which comes to Rs. 9905.

In this way, you can do the bifurcation of interest and principal in an EMI.

## Separating the Principal and Interest Components for Each Month Manually Using Calculator

If you are still wondering how to split principal and interest in EMI, you can simply do it using pen, paper, and a calculator.

First, find your periodic EMI with this formula:

EMI = P x [R x (1+R)^n]/[{(1+R)^n}-1]

Where:

• P = Principal loan amount
• R = Periodic interest rate (annual interest rate in decimal/12)
• n = Repayment tenure in months

Once you get the EMI, you can calculate the principal and interest component of a particular month with the following formulas:

Interest component = P x R

Where:

• P = Remaining principal loan amount
• R = Periodic interest rate (annual interest rate in decimal/12)

And principal component = EMI – interest component

It is essential to know the interest and principal components of your loan not only for the entire tenure but also for each month. You can use the PaySense loan EMI calculator to see the EMI options for your loan and total interest for different loan terms. And to calculate the principal and interest component in EMI of a particular month, use any of the above two methods.

Knowing your outstanding principal amount makes it easier for you to calculate the best time to pre-pay your loan. If you get some money from some unexpected avenue and want to unburden yourself of the monthly EMI and pay up in full, or if you happen to be thinking in those terms.

PaySense offers instant personal loans from Rs. 5000 to Rs. 5 lakh at flexible loan tenures and EMIs. Download the PaySense personal loan app now.

## FAQs

1. How is principal and interest component calculated in EMI?

– You can manually calculate the principal and interest component of a particular month’s EMI in two ways:

• Using mathematical functions in an excel sheet
• Doing mathematical calculations using pen, paper, and calculator

Here’s how:

• Using excel sheet

Open an excel sheet or Google Sheet, and in any cell, type the below formula to get the principal and interest component of a particular month:

To get the principal component in a particular month type: =PPMT(i,x,n,-p)

To get the interest component in a particular month: =IPMT(I,x,n,-p)

Where ‘i’ is the monthly interest rate

‘x’ is the particular month for which you want to calculate principal and interest components. i.e., 1st month, 10th month, 23rd month, etc.

‘n’ is the loan tenure in months

‘p’ is the principal amount

• Using pen, paper, and calculator

First, find your periodic EMI with this formula:

EMI = P x [R x (1+R)^n]/[{(1+R)^n}-1]

Where:

P = Principal loan amount

R = Periodic interest rate (annual interest rate in decimal/12)

n = Repayment tenure in months

Once you get the EMI, you can calculate the principal and interest component of any particular month with these formulas:

Interest component = P x R

Where:

P = Remaining principal loan amount

R = Periodic interest rate (annual interest rate in decimal/12)

And principal component = EMI – interest component

2. What is the interest component in EMI?

– An EMI comprises two separate variable components: the principal amount component and the interest component. The interest component shows the amount of interest paid in a particular month’s EMI.

The interest component is higher in the initial EMIs and keeps on reducing until the end of the loan tenure.

3. How do you separate principal and interest?

– You can separate the principal and the interest component of a particular month’s EMI in two different ways:

1. Using mathematical functions in an excel sheet, and
2. Doing calculations with pen, paper, and calculator using periodic EMI formula

4. How do you calculate the principal component?

– You can find the principal component in the EMI of a particular month in two different ways:

1. Using mathematical functions in an excel sheet, and
2. Doing manual calculations using periodic EMI formula

5. How EMI is calculated by banks?

– There are three methods to calculate EMIs:

• Annual Reduction Method or Flat Rate Method
• Monthly Reduction Method or Reducing Balance Method
• Daily Reduction Method

PaySense offers personal loans on a reducing balance basis. There is a reduction in the principal amount with each EMI paid. And hence, a periodic interest is calculated only on the outstanding loan amount and not the loan amount initially borrowed. 