What is an EMI
EMI stands for Equated Monthly Instalment. It is a fixed amount that the borrower pays the lender or lending institution every month. The EMI is calculated by adding the principal amount and the interest on it and dividing this sum by the total tenure i.e. the number of months for which the loan is taken. The resulting EMI includes both a part of the principal amount and the interest in varying ratios. Initially, the ratio of the interest is higher compared to the principal in the EMI. With each successive EMI, this ratio changes and towards the end of the tenure, the principal has the higher ratio in the EMI.