Term - E : Equated Monthly Instalment (EMI)

Equated Monthly Instalment (EMI)

Equated Monthly Installment (EMI)

To repay a loan, a borrower has to make periodic payments of principal and interest. The interest amount will go on diminishing as the principal amount keeps going down resulting in high initial payments and lower payments later. To even out the burden and make the installments the same and thus easy to understand, the principal and interest can be combined in such a way that the payment of this combined amount every month will result in full liquidation of the loan at the end of the repayment period. This principal and interest combined installment is the Equated Monthly Installment or EMI