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Anishka Bhadly
Anishka Bhadly is a content writer with a finance and business background. She has completed her bachelor's degree with a specialisation in finance and is currently pursuing an MBA in the finance field too. The knowledge she has gained from her studies and experience working with EdTech companies helped her combine theoretical knowledge with practical industry insight. Her expertise lies in creating well-researched, informative, and reader-friendly content in various banking, personal finance, loans, insurance, and investment-related topics.
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EMI, or Equated Monthly Instalment, is the amount that a borrower pays to the lender every month for a particular tenure to repay the loan amount. The EMI comprises the principal and the interest amount. The EMI is determined based on the loan amount, rate of interest, and repayment tenure. A longer repayment period will ensure that the EMI is lower, but the total amount of interest paid will be higher. By understanding EMI, a borrower can understand the monthly payment structure and the various loan options. Individuals can use the EMI calculator on the LoansJagat website to compare their loan options and manage their repayment obligations.
The full form of EMI stands for Equated Monthly Instalment. In simple terms, an EMI is the amount paid to a lender monthly by a borrower. EMI consists of a part of the amount that was taken as a loan by the borrower and the interest on it. The borrower pays a part of the money he has to pay back at a time instead of paying everything altogether. The EMI amount is almost the same every month.
EMI is calculated using the amount of loan, rate of interest, and tenure. It enables the borrower to know the amount payable each month towards the loan.
Formula:
EMI =
[P × R × (1+R)^N] / [(1+R)^N-1]
Here:
This means, for a ₹100,000 loan taken at a 12% interest rate, the EMI for 12 months will be approx ₹8,885.
Understanding the calculation of EMI helps borrowers plan finances in a much better way. Moreover, it makes it easier for him/her to compare different loans and decide the repayment tenure according to his or her income and, thus, financial needs.
An EMI depends on various factors such as the amount of the loan, the rate of interest, the tenure of the loan, the amount of the down payment, and the credit score. Having an understanding of the factors that influence EMI assists a borrower in estimating the amount of the monthly instalment.
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A good credit score helps in availing a lower rate of interest, which in turn reduces the value of the EMI.
EMI is influenced by various factors besides the amount of the loan. The monthly instalment is also affected by the rate of interest, credit score, tenure, and the amount of down payment made.
EMI, or Equated Monthly Instalment, helps you make repayment of borrowed money in the form of easily manageable monthly payments. But having a good EMI does not mean you have an affordable or cheap loan. You need to take a close look at rates, tenure, processing fees, interest paid, and the overall amount you would be repaying. Taking a loan at a lower interest rate over a long tenure might make your EMI smaller, but your overall outflow would be larger. You may want to go for a shorter tenure to save on interest, but then you may have to pay a hefty EMI. Your EMI should be such that it is comfortable for you to repay while leaving you with enough money to meet your other financial obligations. Make sure to compare overall loan costs before you decide on which loan to take.
EMI is the monthly instalment you pay to the lender against a loan sanctioned. 'EMI' stands for 'Equated Monthly Instalment', wherein the borrower pays back the loan amount plus the interest to the lender.
EMIs, although they seem good for you, are a financial burden because high EMIs may impact your monthly budget.
EMI can be calculated based on the loan amount, rate of interest, and tenure of the loan.
A loan of ₹100,000 at the rate of 12 per cent would require payment of ₹8,885 as EMI for a period of 12 months.
Some banks offer you a special scheme of a 0% interest rate; however, there are certain charges applicable for processing such a loan.
Most banks provide a prepayment or foreclosure option wherein you can pay back the entire loan amount before the end of the tenure.
In simple terms, EMI stands for 'Equated Monthly Instalment'.
Taking a long-term loan may make you pay more interest on the borrowed amount, whereas high EMIs can be a financial burden.
Paying EMIs on time helps maintain a good CIBIL score, whereas missing out on payments can hamper your credit score.
Missing out on a single EMI results in a late fee and also affects your CIBIL score negatively. If you miss out on several EMIs, your lender might take legal action against you.
