By way of example when you have availed that loan of Rs. 1,00,000 and paid 3 instalments within the EMIs choosing to pay off Rs. 25,000 within the next instalment. Your interest will likely then be determined regarding the outstanding after deducting the re payment to the key in the last 3 EMIs therefore the 25k minus interest for the 4th instalment. It helps to ensure that your interest burden is leaner whenever you spend the next EMI in the loan resulting in a quicker payment for the loan quantity.