What is an Equated Monthly Installment (EMI)?
An Equated Monthly Installment (EMI) is a fixed monetary amount paid by a borrower to a financial lender on a recurring calendar day each month. EMIs are designed to extinguish an amortized loan completely over an agreed tenure, combining both interest charges and principal recovery in every single payment installment.
During the initial loan phase, a greater portion of each EMI goes toward servicing accrued interest. As the outstanding loan balance progressively shrinks, a steadily larger portion of the monthly payment is allocated toward principal repayment until the loan balance reduces to zero.