What is an Equated Monthly Installment (EMI)?

An Equated Monthly Installment (EMI) is the fixed payment made each month to repay a loan covering principal and interest portions. With EMI plans, borrowers enjoy predictable expense structures, aiding budgeting and avoiding variable rate swings. The lender calculates the monthly sum based on factors like loan principal, interest rate, and desired repayment period.

Key Points

• Uniform Payment: Remains constant unless renegotiated or refinanced.
• Allocation Changes: Early installments carry higher interest components, shifting to principal over time.
• Simplicity: Easy for planning recurring household or business cash flow.
• Penalties: Missed payments can harm credit scores or trigger late fees.

For many, EMIs facilitate major acquisitions—like vehicles or equipment—by transforming a large cost into manageable increments throughout the loan term.