Equated Monthly Installment (EMI)

Search Dictionary

Definition of 'Equated Monthly Installment (EMI)'

An Equated Monthly Installment (EMI) is a fixed amount of money that a borrower pays to a lender each month to repay a loan. The EMI is calculated based on the principal amount of the loan, the interest rate, and the term of the loan.

The EMI is the same amount each month, regardless of how much of the principal has been repaid. This is because the interest is calculated on the outstanding principal balance, which decreases each month as the borrower makes payments.

The EMI is a convenient way to repay a loan because it provides a consistent monthly payment that the borrower can budget for. It also makes it easier to compare loans from different lenders, as the EMI is the same for all loans with the same principal amount, interest rate, and term.

However, it is important to note that the EMI does not take into account the total cost of the loan. The total cost of the loan includes the principal amount, the interest, and any fees that are charged by the lender. It is important to compare the total cost of the loan, not just the EMI, when choosing a loan.

There are a few different ways to calculate the EMI. One way is to use the following formula:

EMI = P * (r / 12) * (1 + r / 12)n / [(1 + r / 12)n - 1]


P = principal amount of the loan

r = interest rate per year

n = number of years of the loan

Another way to calculate the EMI is to use a loan calculator. Loan calculators are available online and can be used to calculate the EMI for different loan amounts, interest rates, and terms.

Once you have calculated the EMI, you can use it to budget for your monthly payments. You can also use the EMI to compare loans from different lenders.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.