What is EMI? Everyone at some point in their life has availed the loans. But, do you exactly know what is EMI? If you don’t know scroll down this page and check it out. Before you take EMI loan get a clear idea about the EMI here. All the info regarding the Equated Monthly Installment is available on this page. Not only about EMI, but we have also given the EMI calculator separately for all types of EMI loans such as Car loan EMI, personal loan EMI, Home loan EMI. EMI features along with the EMI benefits and EMI payment options are mentioned below.
What is EMI
Full form of EMI is equated monthly installment. Usually, everyone uses this EMI, without complete knowledge of it. EMI is very attractive scheme, but you have to understand it clearly. The EMI name itself says it is a monthly installment basis. EMI is defined as the fixed amount which is to be paid by the borrower to the lender every month. As the EMI loan tenure increases the loan principle increases. Coming to the interest rates they are calculated every month or for 3 months. The calculated EMI interest rate on the Principle amount are added to the Principle itself. the Principle is nothing but the loan amount. The obtained EMI per month should be paid till the complete loan is repaid. If you are applying for the EMI, the following are the questions to be answered by the borrower.
- Loan Amount.
- The Value of the property.
- Gross & Net salary.
EMI Payment Options
There are 2 types of EMI options. Know about both the options so that you can choose the best of the two EMI options. The EMI options are:
- Fixed Rate EMI:
Fixed rate which says that it is fixed. The fixed rate loans are those which are remained the same throughout the EMI tenure amount. The Fixed rates are favorable when the interest rates are low.
- Floating Rate EMI:
The floating rate EMI moves like bicycle wheels i.e, one after the other. It is tandem with the RBI measures and the market. There may be changes in the Floating Rate EMI based on the market and economy. In this the EMI is constant, and the tenure may increase or decrease.
EMI Amortization Table
Once, you know what is EMI, the EMI loan amortization table helps you to clearly observe how much amount of the monthly payment goes towards the interest rate and the principle. Monthly EMI amount is also obtained in the Amortization calculator. We have just considered an example to calculate the EMI. Just see the below table to get a clarity about the EMI. EMI amortization table is really a best one to know the EMI interest rates. So, if you know what is EMI Amortization Table you can get interest rates easily. The amortization table is available in both months and years.
EMI Amortization example:
Principle/ loan Amount: 100,000.
Interest Rate: 12%.
Loan tenure/ term: 10 years/ 120 months.
Annual Loan Amortization Table
Year/ Tenure | Principle/ loan Amount | Intrest Rates | Total Payment per month | Balance |
1 | 5,513.20 | 11,703.31 | 17,216.51 | 94,486.80 |
2 | 6,212.42 | 11,004.10 | 17,216.51 | 88,274.38 |
3 | 7,000.31 | 10,216.21 | 17,216.51 | 81,274.07 |
4 | 7,888.12 | 9,328.39 | 17,216.51 | 73,385.95 |
5 | 8,888.53 | 8,327.98 | 17,216.51 | 64,497.42 |
6 | 10,015.82 | 7,200.69 | 17,216.51 | 54,481.60 |
7 | 11,286.08 | 5,930.44 | 17,216.51 | 43,195.52 |
8 | 12,717.43 | 4,499.08 | 17,216.51 | 30,478.09 |
9 | 14,330.32 | 2,886.19 | 17,216.51 | 16,147.77 |
10 | 16,147.77 | 1,068.75 | 17,216.51 | 0 |
Formula To calculate EMI
The EMI is calculated using the formula given below. This formula consists of Principle, intrest rate, loan tenure period.
EMI Formula
E= P.r. (1+r)^{n}/((1+r)^{n}-1).
E stands for EMI.
P stands for Principle/loan amount.
r stands for Rate of Interest.
n stands for tenure/ loan period or duration.
Otherwise, you can use the EMI Calculator to check the payment, EMI interest rates in an easy way.
EMI Types
Nowadays the EMI is offered for all product we buy including the electronics and other goods. So, before you take the loan through EMI know the major types of the EMI loans. You can easily calculate the EMI of various categories using the calculators on our site. The following are the different types of EMI’s.
- Home loan EMI.
- Car loan EMI.
- Personal loan EMI.
- Property EMI.
Different Methods Of EMI Computation
- Annual Reducing loan Method.
In this, the interest is calculated for 12 months, and the loan principle is reduced per month. Interest is calculated on the initial loan amount, and this method has least benefits.
- Monthly Reducing loan Method.
It is also an another best way to understand the EMI calculation. In this, there will be a reduction in Principle amount as the EMI is paid for every month. The Intrest is calculated on principle amount.
- Daily Reducing loan Method.
In this daily reducing long method, the principle is reduced per day as you pay the EMI every day. This is not favourable as it includes the daily payment.
EMI Changes During the Loan Period
As EMI states that the money is equated per month, but it is not the same all the time. The EMI is impacted in few cases. Therefore, we have given all the situations where EMI changes.
- Change in loan tenure.
- Prepay of Loan/ Principle amount.
- The Loan with flexible repayment.
- Change in Rate of Interest.
- Progressive EMI’s.
EMI Benefits
The EMI is best scheme to take loans. Because it is difficult for everyone to get large amounts of the loan or to pay back the loan amount. As we pay the loan amount in installment basis, it is the financially good option. For example in case, if you want to buy a property you may not have huge amounts of money. In such cases, the loan through EMI is the best loan option. So, we have mentioned some of the advantages of EMI below.
- Ability To Buy
EMI loan is only the option to buy the goods which you like, even if you don’t have money to buy.
- Capacity to afford High-cost commodities.
Some of the middle-class people can buy the costly commodities with onetime payment. So, it is also an advantage of EMI loans.
- Payment is so easy
There will be fixed amount for each every month. Therefore, you will be tension free to pay the constant amount monthly.
Along with the advantages there also some disadvantages of EMI. The EMI drawbacks are given below.
- Long-term debts
If the EMI tenure is long term, you have to pay till the total loan is repaid. So, plan to have a short term EMI tenure because long-term debts have high-interest rates.
- Serious Consequences
The date to pay EMI is constant every month. In case if you have not paid the installment amount on that date there will be some fine along with other bad consequences. Therefore, don’t forget the EMI payment date.
List of banks offering EMI Loans
There are several banks which provide the Car EMI loans, EMI home loans and housing loan on EMI. But the EMI interest rates for different banks differ. Therefore, we have mentioned the top banks which give EMI loans.
- SBI.
- ICICI.
- HDFC.
- Union Bank Of India.
- Axis Bank.
- Federal Bank.
We hope that you have got complete details of What is EMI and for furthermore, info about Equate monthly amount and EMI calculator visit our site.