What is EMI?

By | March 15, 2011

A fixed payment amount made by a borrower to a lender at a specified date each calendar month is called equated monthly installment or EMI. EMI are used to pay off both interest and principal each month, so that over a specified number of years, the loan is paid off in full.

The biggest benefit of an EMI for borrowers is that they know precisely how much money they will need to pay toward their loan each month, making the personal budgeting process easier.

Most common types of loan, such as mortgages loans, home loan, etc. the borrower makes fixed periodic payments to the bank over a period of time to settle the loan. Borrowers have a choice between fixed or variable amount repayments. In EMIs borrowers are usually only allowed one fixed payment amount each month.
Calculation of EMI is a very simple procedure. There are even free software’s available these days to get the same. Excel is a powerful tool to calculate EMI. All one needs to do is enter the values of few variables into the inbuilt formula. All you have to do is enter the values of rate of interest, number of months and the principal amount.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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