EMI

EMI stands for Equated Monthly Instalment. It is the fixed amount you pay your lender every month until a loan is fully repaid, covering both the principal (the amount borrowed) and the interest (the cost of borrowing).

An EMI stays the same every month for a fixed-rate loan, but the split changes over time: early payments are mostly interest, and later payments are mostly principal. This is why making prepayments early in a loan saves so much interest.

The EMI depends on three things: the loan amount, the interest rate, and the tenure. You can calculate it for any home, car or personal loan with the Loan EMI Calculator.