How Do I Calculate the Principal Component and Interest Component of An EMI

Personal Finance

The loan is applied to meet the financial needs. It could be a personal or home loan, depending on the situation. You have to pay interest on every loan. This rate leads to the calculation of the EMI with some other factors. 

Understanding the principal component analysis calculator is crucial. It helps to know the principal and interest components of an EMI. Broadly, EMI includes principal and interest. The amounts of both change during the period. This is why you should know PCA calculation.

Understanding EMI

When you take a loan from a financial institution, you must repay it. The repayment amount includes the principal and interest amounts. The total amount owed is divided into monthly payments. These instalments are called Equated Monthly Instalments (EMI). 

You need to pay EMI until the loan is settled. For the calculation, the total principal and interest are considered. Then this is divided by the total tenure of the loan. It will give you the amount to be paid monthly. In the initial months, the interest paid is high. Eventually, the interest decreases. 

Though the EMI is the same every month, the principal and interest are not. Usually, the principal paid is more, and the interest paid is less. It is calculated using the interest component calculator.

EMI Calculation

For PCA calculation, there are four important components. The components are:

  • Principal borrowed.
  • Interest rate.
  • Loan tenure.
  • Monthly/annual resting period. 


EMI = [P x R x (1+R) ^ N] / [((1+R) ^ N)-1]

P stands for the principal. It is the total amount you have borrowed from the lender. It is the base amount in the principal component analysis calculator. 

R stands for interest rate. It is the rate charged on the principal amount by the lender. It can be a fixed interest rate or a floating interest rate. 

N stands for loan tenure. It is the time given to you by the lender to repay the loan. It depends on the amount, lender, and type of loan. 

Principal Component Analysis Calculator Manually and Using Excel

You can calculate principal and interest in an EMI both manually and using Excel.

1] Manual Calculation

You must calculate EMI for the manual principal component analysis calculator. Once you have the EMI, you can use the principal and interest component calculator.

Interest component = P x R


P stands for the remaining principal amount in the loan.

R is the periodic interest rate. It is calculated by dividing the annual interest rate in decimal by 12.

To calculate the principal component, use the formula = EMI – interest component.

2] Calculation In Excel

The principal and interest component calculator can help to calculate EMI. The formula is:

  • Calculating principal component of each month = PPMT(I,x,n,-p)
  • Monthly interest component calculator = IPMT(I,x,n,-p)
  • EMI calculator = PMT (I,n,-p) 


i is the monthly interest rate.

n is the loan tenure in months.

p is the principal amount.

x is the month you want to calculate the principal or interest component.

EMI Amortisation Table

You use the interest component calculator to determine the interest paid each month. The amortisation table outlines how you will pay off the entire loan amount. It is created based on the principal component analysis calculator. 

It is a table that gives you an idea of the monthly interest and principal amount paid off. 

Suppose you apply for a personal loan of INR 100,000. You have to repay this loan in one year. This is your loan tenure. The rate of interest is 10.5% PA. The EMI schedule is as follows:

MonthPrincipal (P)Interest (I)Total EMI (P+I)Balance% of loan paid
 ₹ 1,00,000₹ 5,778₹ 1,05,778₹ 1,05,7780%
Jan₹ 7,940₹ 875₹ 8,815₹ 92,0607.94%
Feb₹ 8,009₹ 806₹ 8,815₹ 84,05115.95%
Mar₹ 8,079₹ 735₹ 8,815₹ 75,97124.03%
Apr₹ 8,150₹ 665₹ 8,815₹ 67,82132.18%
May₹ 8,221₹ 593₹ 8,815₹ 59,60040.40%
Jun₹ 8,293₹ 521₹ 8,815₹ 51,30648.69%
Jul₹ 8,366₹ 449₹ 8,815₹ 42,94157.06%
Aug₹ 8,439₹ 376₹ 8,815₹ 34,50165.50%
Sep₹ 8,513₹ 302₹ 8,815₹ 25,98874.01%
Oct₹ 8,587₹ 227₹ 8,815₹ 17,40182.60%
Nov₹ 8,663₹ 152₹ 8,815₹ 8,73891.26%
Dec₹ 8,738₹ 76₹ 8,815₹ 0100%

You can see that the principal is initially low while the interest is high. But coming to an end, interest is low, and the principal is high. 

5 Things PCA Calculations Display About EMI

PCA calculation displayed the following 5 important aspects of EMI.

  1. Your EMI depends on loan tenure, interest rate, and loan amount.
  2. The EMI remains the same throughout the loan tenure. 
  3. The EMI is divided between principal and interest.
  4. Interest makes up a major portion of your EMI payment during the initial years.
  5. The EMI amount might change if there is a change in the interest rate. 

How Can EMI Change During Loan Tenure?

The PCA calculation displayed the interest and principal components separately. The EMI remains the same during your loan tenure. But the EMI can change under certain circumstances. The following factors influence the EMI:

1] Loan Prepayment

You can repay a part of your loan early if you have funds. It will change the outstanding amount of the loan. You will now calculate the EMI on the remaining amount. It will change the EMI to be paid to the financial institution. 

2] Floating Interest Rate

In the case of fixed interest rates, the EMI is always the same. But in the case of a floating interest rate, interest changes according to market conditions. It also affects the EMI.

3] Flexible EMIs

Some financial institutions give you the option to change your EMIs. The EMI can be increased or decreased. It is linked to your income and is calculated after a certain interval. 

4] Progressive EMIs

It allows you to pay a fixed EMI per PCA calculation during the initial years. Later, the EMI amount increases. It is usually applied to long-term loans. 


The EMI calculation is very important. The right calculation can help you with efficient financial management. The principal component analysis calculator can help you identify the principal and interest components. Visit Piramal Finance to get a loan with a complete PCA calculation. Manage your funds efficiently with proper knowledge of your loan’s principal and interest component calculator.