EMI Full Form is Equated Monthly Installments. It is a specified amount that has to be paid to the bank/financial institution or any other lender at monthly intervals on a specified date. With loans available for every purpose like the purchase of a vehicle, for creating an immovable property, for the education of self or children etc., many individuals resort to these loans to fulfil their dreams. The convenience of these loans is that the payment can be made in Equated Monthly Instalments. The EMI is calculated based on the loan amount, the tenure and the interest on the loan. You can choose the EMI that suits your budget by varying any of the components, i.e., the loan amount, the tenure or the interest rate. With a lot of players in the market, you can choose the one that is offering the best deal. You can also calculate the EMI using the EMI calculator, arrive at the EMI that is comfortable and then approach the specific lender.
The primary requisites to calculate EMI are loan amount, tenure and the rate of interest. You can use an EMI calculator available on the official website of the bank/financial institution if you have the loan amount, tenure and rate of interest.
Loan Amount: It is the amount you wish to borrow from the bank/financial institution. The higher the loan amount, higher is the EMI.
Tenure: The bank/financial institution stipulate a maximum repayment period depending on the type of loan you opt for. You either opt for the entire repayment period or as per your EMI affordability. The higher the tenure, the lower will be the EMI, and the lower the term higher will be the EMI.
Rate of Interest: It is the interest charged on a loan availed of by you. The rate of interest is not uniform among the financial institutions. You can choose the lender who is offering the best deal in terms of interest charged.
While choosing the best deal, you should also consider the processing charges and the processing charges and the prepayment/pre-closure charges collected by the institution. These charges also add up to the cost of the loan besides the interest charged.
Additional Info: Also check SBI Home Loan EMI Calculator
Most of the banks provide EMI options for purchases beyond a specific limit made using credit cards. For online purchases, before making the payment using the credit card, you choose the EMI option. Alternatively, after the purchase is made, you can convert the purchase to EMI through a net banking facility. You can opt for 6, 12, 24, 36 or 48 EMIs depending on the card you are using to make the payment.
The credit card limit will be blocked to the extent of the amount converted to EMI and will be restored after the entire EMIs are paid.
EMI can be calculated by applying the formula given below
EMI = P x R x (1+R)^n/((1+R)^n-1) where
P is Principal
R is the Rate of Interest and N is the tenure.
You can manipulate the variants and calculate the EMI till you arrive at an EMI that suits your pocket. The EMI calculator can be used any number of times for free.
EMI calculation is faster with EMI calculators, and there will be no scope for errors as there will be no manual intervention. EMI calculators will give you 100% accurate results.
EMI can vary during the loan tenure if you have opted for a floating rate of interest and if you make part prepayments whenever you have surplus funds.
The EMI will be higher when the interest rate goes up and will be lower when the interest rates reduce. If you are unable to pay a higher EMI, you can opt for a reschedule wherein the tenure will be increased to reduce the EMI provided the extended tenure is within the maximum repayment period stipulated.
If you make part-prepayments whenever you have surplus funds, you can either keep the EMI stable to reduce the tenure or keep the tenure stable to decrease the EMI.
The pre-EMI option is given in the case of an Education Loan and a Housing Loan. In the case of an Education Loan, the repayment of EMI starts two years after the completion of the course. In a Housing Loan, the EMI will start only after you get possession of the property in case of the purchase of a flat and after the completion of construction if you have availed housing loan for constructing a house on a plot. In a nutshell, the repayment begins when the holiday period ends.
In order to avoid accumulation, you can pay the interest as and when due in the case of a Home Loan. In the case of an Education Loan, you can pay the interest as and when applied. Payment of interest alone before the actual EMI repayment starts is pre-EMI.
There are two different types of EMIs.
EMI in Arrears: EMI in Arrears is the Standard EMI. Here the borrower repays a specified amount on a specified date till the completion of the loan tenure. On sanction and execution of documents, the entire sanctioned amount minus the processing fee will be credited to the borrower’s bank account. No EMI will be deducted in advance from the sanctioned loan amount.
EMI in Advance: The EMI collected while disbursing the sanctioned loan amount into the borrower’s loan account is the EMI in Advance. The lender will deduct an advance EMI and the processing charges from the sanctioned amount before crediting the sanctioned loan amount into the borrower’s bank account.
Additional Info: Also check HDFC Home Loan EMI Calculator
There are a lot of many who have curbed their dreams of creating an asset, buying a vehicle or planning a holiday for want of funds. Taking advantage of this scenario, financial institutions have devised loan schemes for every purpose. You avail of the loan and payback in EMIs; You can also opt for an EMI that suits your pocket by varying either the loan amount or the tenure.
Now that you are aware of what EMI Full Form is and the advantages of EMI, the flexibility in EMI options, you can approach the bank for a loan if you have any dreams pending on your bucket list.
EMI full form is Equated Monthly Instalments. EMI is the repayment mode that the banks offer for having availed of a loan from them. You will have to pay a specific amount on a specified date which constitutes both the principal and the interest amount till the end of the tenure chosen.
There are two types of EMIs, i.e., EMI in Advance and EMI in Arrears. In the case of EMI in Advance, the bank/financial institution will deduct an EMI in advance and the processing charges from the sanctioned loan amount before crediting to the borrower’s bank account.
EMI in Arrears is the Standard EMI that will be paid month on month. The financial institution/bank will deduct only the processing charges from the sanctioned amount before disbursing it to the borrower’s bank account.
EMI in advance is adjusted only towards the principal. The interest portion is not deducted while deducting the principal amount from the sanctioned amount. Deduction towards interest commences only after the initial EMI is collected.