Frequently asked questions
What is EMI?
EMI, or Equated Monthly Installment, is the fixed payment a borrower makes to a lender each month. Each EMI pays that month's interest plus part of the principal, so the loan is fully repaid by the end of the tenure.
How is EMI calculated?
EMI = [P × R × (1+R)^N] / [(1+R)^N − 1], where P is the principal loan amount, R the monthly interest rate and N the number of monthly installments.
What does the amortization schedule show?
For every single month of your loan it shows the EMI paid, how much of it went to principal, how much to interest, and the balance still owed, plus yearly totals.
Why does the interest portion shrink over time?
Interest is charged on the outstanding balance. As the balance falls with each payment, less of your EMI goes to interest and more goes to principal.
Can the EMI amount change during the loan period?
It stays fixed for fixed-rate loans. For floating-rate loans it can change when the interest rate changes, or if you prepay part of the principal.
What happens if I miss an EMI payment?
Missing a payment can mean penalties, extra interest and a negative impact on your credit score, so it's important to pay on time.