Does Bank charges interest first then principal

 Lot of times, people think that they are paying lot more interest when they take a loan and mention that one should not take loan.

As an example, if you take 50L Rs of loan at 8% for 20 yrs, your monthly EMI will be 41,822 and your total interest paid through the entire 20 yrs tenure will be Rs 50 L. So, you ended up paying 1 crore our of which 50 L was principal and little over 50L was Interest.

If you look at EMI division, out of total of Rs 41822, initial interest will be Rs 33300 while principal payment will be Rs 8500. So again, it looks like Interest payment is high.  This interest reduces to equal to principal in 12 yrs (so at that time EMI share of principal and interest will be Rs 21.5K). This share of interest will continue to reduce and in last EMI will be almost zero. 

Does it mean, one ends up paying all the interest portion upfront or early in the cycle. 

Actually, the answer is "NO". Basically, the interest is always calculated on the portion which is loan amount left. In the first month, the loan amount is full 50L so interest calculated based on 8% interest will be Rs 33300. while say after 12 months, the loan amount reduces to Rs 48.85 Lacks since small portion of principal was paid out. So in that case, the interest amount on Rs 48.85 Lacks will be Rs 32600 so it will "appear" lesser but is basically following a set path that banks are charging you interest for the amount that is outstanding (giving to you-you gave back via EMI). 

This can be further seeing from the fact that if you prepay a part of the loan, then bank gives you option to either reduce your EMI (and hence your interest amount for the money paid earlier) or reduced the loan tenure (from 20 yrs to say 15 yrs) which also reduces your interest paid. 

So, all in all, it is not that banks collect interest from you at earlier date. It is more like banks only collect interest for your outstanding balance which keeps on reducing month over month and hence interest also keeps on reducing month over month. 

Hope this helps in explanation of why interest portion is higher in fixed EMI model.