A Pre-EMI (Equated Monthly Instalment) is where a Borrower is called upon to pay only the interest element of the EMI. Where a loan is only partially disbursed, the Borrower has an option to pay pre-EMI until the loan is fully disbursed. Thereafter, payment of the regular EMI (including components of both principal and interest) will commence.
Pre-EMI
In a pre-EMI arrangement, the instalment of interest is calculated only on the amount of loan disbursed and outstanding. The entire amount paid is adjusted by the Lender toward interest due and there is no change in the amount of loan outstanding except for an increase in the event of further disbursement. Loans are generally disbursed in tranches depending upon progress in implementation of the project. Thus, the pre-EMI would increase with each succeeding disbursement as the amount outstanding increases. The regular EMI would generally become payable after one clear calendar month from the date of the final disbursement
Opting for Pre-EMI
Exercising the option for pre-EMI would be a prudent decision for a Borrower if:
- he faces cash flow constraints. If the Borrower is staying on rent, he may not have the financial capacity to pay the monthly rental and the full EMI concurrently. Or, he may be expecting a pay increase before long;
- he is an investor who will be selling the property soon after taking possession;
EMI - well and good.But, pre EMI; that surprised me the very first time I heard that term. Significantly, that too along with EMI holds an important place for a customer and actually it can prove a boon to the customer in terms of his financial condition.The writer explains it all and briefly.
This is the first time I have come across the term pre EMI. From what I have read, I think it can help borrowers if he/she is having problem with regular, timely income and also those who have invested in real estate, he/she plans to sell soon. An article well explained by the writer.