What is EMI - Equated Monthly Installment
Loans play a major role in our lives. Whether we want to buy a car or a house, we need one or the other financing options. When we think about taking a loan, the first thing that comes to our mind is EMI. EMI refers to Equated Monthly Installment which refers to the amount payable on monthly basis towards the loan we have taken. In the most simple form, EMI includes the part of principal amount which is to be payed monthly plus the interest on the amount.
Factors affecting EMI
The factors that affect EMI to be paid are the principal amount, the rate of interest and the tenure of the loan. The principal amount is the amount that the individual has borrowed from the bank or a financial institution. The rate of interest is the rate at which the interest is charged. Tenure of the loan is the time period within which the loan is to be repaid.
How to Calculate EMI?
The EMIs are in direct proportion with the principal amount and the rate of interest, which means on a higher amount and rate of interest, the EMIs to be payed will be higher. Whereas it is in indirect proportion with the tenure of the loan, i.e. the EMIs will decrease as the tenure increases.
