EMI
Equated Monthly Instalment — the fixed monthly amount you pay your lender to repay a loan over its tenure.
Definition
EMI stands for Equated Monthly Instalment. It is the fixed amount you pay every month to your lender — combining principal and interest — until a loan is fully repaid. Indian banks use the reducing-balance method, where interest each month is computed only on the outstanding principal.
The EMI stays constant over the tenure (for fixed-rate loans), but the internal split shifts: early payments are mostly interest, later payments are mostly principal. This 'amortisation' is why a 20-year home loan often costs nearly 2× the principal in total payments.
Formula
EMI = P × r × (1 + r)ⁿ / ((1 + r)ⁿ − 1)Example
₹50 lakh loan at 9% for 20 years → r = 0.0075, n = 240. EMI = ₹44,986/month, total payments = ₹1.08 cr, interest = ₹58 lakh.
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