What is EMI?
EMI stands for Equated Monthly Installment. It is the fixed monthly payment you make to repay a loan over a chosen tenure.
Definition
An EMI combines both principal and interest into one monthly amount. In the early months, the interest portion is usually higher. Over time, principal repayment increases.
Example
If you take a personal loan of ₹5,00,000 at 12% annual interest for 5 years, your EMI remains the same each month while the principal-interest split changes over time.
Use case
Use EMI when planning affordability for loans like home, car, or personal loans. It helps you estimate monthly cash flow before borrowing.