EMI Full Form
What is the EMI Full Form? The EMI stands for Equated Monthly Installment. It’s a fixed payment amount that a borrower pays to a money lender in a particular period of every month for a period of time. EMI consists of a component and interest part that a borrower is supposed to cover to the lender on a number of years to pay off the loan in full.
Therefore, it’s a combination of principal and interest rates. If you’re planning to take a loan from a financial institution, you must understand how banks work out the EMI that you could appraise loan options of banks and chose one according to your fiscal constraints.
The way to calculate EMI.
The calculation of an EMI depends upon 3 factors that are the following:
- Interest Rate: Rate of interest charged by the usurer, e.g. Bank.
- Loan Amount: The sum borrowed.
- Tenure of the Loan: The time given by the lender to repay the whole loan including the interest rates.
Apartment interest rate:
The interest is calculated on the principal loan regardless of the fact that with every EMI the principal sum is getting reduced. As an example, an individual wants to purchase an automobile and takes an automobile loan of 3 lakh, at a level interest rate 12% and has to cover off it in 3 years then the EMI can be calculated as shown below:
- Power to Purchase: It empowers you purchase items beyond your financial achieve by allowing you pay in installments.
- Flexibility: You can consider distinct EMI options offered by various banks and choose the amount which you would like to cover as payments and may pick the tenure of loan in accordance with your fiscal position.
- No middleman: You directly pay the EMI to the lender without the trouble of contacting a middleman.
- Protects Savings: It doesn’t harm your savings as you have to pay minimum payments rather than a single payment amount.