Define the term EMI

EMI

It is a short form for Equated Monthly Installment. This is the amount paid monthly by a borrower on a monthly basis to the bank or any other lender.

It basically has two components -
1. the portion of the principal amount
2. the interest portion for that month

Normally in the start of the loan repayment period the largest part of the EMI is from the interest part but as you keep paying the premium the Interest portion keeps getting paid off and the principle is the larger portion of the EMI.

I personally feel that banks do this so that in case you decide to payoff the loan earlier or as they call it foreclosure you have to pay some penalty on the principal amount and with maximum principal still remaining to be paid off the penalty also becomes very hefty.

But then thats my opinion, whats yours.

4 comments:

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Simon Greenwhich said...

If you are planning to apply for a loan, you also need to consider the possible monthly installments to prevent issues in the future. It is also a good idea to use some of the money for investment purposes. You can always invest in commodity options trading and see your money grow in time.

Maia Dobson said...

My friend just recently told me about this EMI and it's pretty interesting. I got loans that and debt and I think this would eliminate it. I better as the debt settlement by wites & kapetan if this one is recommendable.