What is EMI and how does it work in India?

Short answer
EMI is a fixed monthly payment you make to repay a loan. It includes both principal and interest and stays mostly the same every month.

What is EMI

EMI stands for Equated Monthly Instalment. In India, EMIs are used for home loans, personal loans, car loans, and even credit card purchases. Instead of paying the full amount at once, you repay the loan in smaller monthly parts over a fixed time period. Isse budget manageable rehta hai and large purchases become possible.

How EMI Works

Every EMI has two parts. One is principal, which reduces your loan amount. The other is interest, which is the cost charged by the bank. In the initial years, a bigger part of your EMI goes towards interest. As time passes, principal repayment increases. Loan dheere dheere kam hota hai, not all at once.

What Decides Your EMI Amount

Your EMI depends on three things. Loan amount, interest rate, and loan tenure. Higher loan or higher interest means higher EMI. Longer tenure means lower EMI but more total interest paid. Short tenure means higher EMI but loan faster close hota hai.

EMI Payment in India

EMIs are usually auto-debited from your bank account on a fixed date every month. This is done through ECS or NACH mandate. Balance maintain karna zaroori hota hai, warna EMI bounce ho sakti hai and penalties lag sakti hain.

Credit Score Impact

Paying EMIs on time helps your credit score. Missing EMIs hurts it. Regular payment shows financial discipline, jo future loan approval ke liye important hota hai.

Final Takeaway

EMI makes borrowing easy, but responsibility ke saath. Loan lene se pehle EMI amount apni income ke hisaab se choose karo. Samajh ke liya gaya loan stress kam karta hai, warna pressure badhta hai.