PED vs EMI: Equal Principal Repayment Explained
Compare PED and EMI interest costs, instalments and cash-flow suitability with worked figures.
Worked example: ₹10 lakh at 10% for 5 years.
Under Principal Equally Distributed (PED), the principal component is equal in each repayment period while interest falls as the outstanding balance declines. Under EMI, the total monthly instalment stays approximately constant.
For a ₹10,00,000 loan at 10% per annum over 60 months, monthly PED principal = ₹10,00,000 ÷ 60 = ₹16,666.67 (before rounding adjustments).
| Measure | EMI | PED |
|---|---|---|
| First payment | ₹21,247.04 | ₹25,000.00 |
| Last payment | ₹21,247.04 | ₹16,805.56 |
| Total interest | ₹274,822.68 | ₹254,166.67 |
| Total repayment | ₹1,274,822.68 | ₹1,254,166.67 |
In this example PED saves approximately ₹20,656.02 in interest but requires a higher first instalment. The appropriate structure depends on projected operating cash flows and sanction terms.
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Assumptions and limitations
These examples are educational and use the stated illustrative assumptions. Actual interest and repayment calculations can depend on day-count convention, compounding, rounding, moratorium, fees, rate resets, sanction conditions and bank policy. Verify against the sanction letter and account statement.