Do you know what is the EMI Full Form? EMI Full Form stands for Equated Monthly Installment. EMI is a set monthly payment that the borrower makes to the lender on a specific day for a predetermined length of time. The principal and interest portions of the EMI must be paid to the lender in particular years in order for the loan to be fully repaid. As a result, the principal and interest rates are not identical. To analyze numerous loan possibilities from various banks and select the one that best fits your financial limits, you must understand how banks determine EMI if you intend to take out a loan from one.
What is EMI?
EMI is Equated Monthly Installment which means when someone borrows money from a lender or bank and gives back this money in short pieces at a specific date with interest and principal. This money back is called is EMI. EMI rates may be different for multiple banks and Lenders.
The EMI depends on some factors –
The EMI depends on a number of factors, including:
- Rate of interest
- principal amount borrowed
- Annual or Monthly Rest Period
- loan term
The loan amount is the borrowed amount, often known as the principal amount. The amount of time the lender has to repay the whole loan plus interest is known as the loan’s term or tenure. Lenders, for example, a bank impose an interest rate on the borrowed money.
What is EMI Formula?
EMI is calculated using the following formula: EMI = P x R x (1+R) ^N / [(1+R) ^N-1], where P is the loan amount, R is the interest rate, and N is the tenure in the number of months. The relationship between the loan amount or interest rate and the EMI payment is linear.
How to Calculate EMI?
The EMI calculation depends on three factors which are as follows:
- Interest Rate: The rate of interest imposed on borrowing money, e.g. Bank or Moneylender.
- Loan Amount (Principal Amount): Amount borrowed.
- Loan Tenure: The lender allows a certain amount of time for the full loan, interest included, to be repaid.
The interest is calculated on the entire principal loan, irrespective of the fact that the principal is being reduced with each EMI. For example, if someone wants to buy a car and for this, he takes a loan of Rs 3 lakh at 12% fixed interest. Which is to be repaid in 3 years, and then the EMI can be calculated as follows:
Flat rate of interest: 7.2%
Principal amount: 300,000
Total duration: 3 years
EMI = P x R x (1+R) ^N / [(1+R) ^N-1]
The interest rate (R) on your loan is decided on a monthly basis.
R = Annual Rate of interest/12/100
If the rate of interest is 7.2% p.a. then r = 7.2/12/100 = 0.006
Putting these numbers in the formula-
EMI= ₹3, 00,000 * 0.006 * (1 + 0.006)36 / ((1 + 0.006)36 – 1)
EMI= ₹9,291
The entire amount payable will be ₹9,291 * 36= ₹334,476.
The Principal loan amount is ₹3, 00,000
The Interest amount will be ₹34,476.
What are the benefits of EMI?
Flexibility: You may consider the many EMI alternatives provided by several banks, determine how much you want to pay in instalments, and select the loan term based on your financial situation.
Power to Buy: By allowing you to pay in instalments, it enables you to purchase products that are out of your price range.
Protects Savings: Your savings are not affected as you will have to make minimum regular payments instead of a lump sum amount.
No middleman: You pay the EMI directly to the lender without having to go through any middleman.
Other EMI-related Full Forms
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| EMI | Equal Monthly Installments | Finance |
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| EMI | European Monetary Institute | Stock Exchange |
| EMI | Electromagnetic Interference | Computer and Networking |
| EMI | Energy Management Institute | Business Management |
| EMI | External Memory Interface | Computer Hardware |
| EMI | Electro-magnetic Interference | Telecommunication |
| EMI | Electronic Money Institution | Accounts and Finance |
| EMI | Energy Management Interface | Computer Hardware |
| EMI | Exchange Message Interface (Bellcore standard for data transmission between RBOC/LEC | Computer and Networking |
| EMI | Equated Monthly Instalment | Accounts and Finance |
| EMI | Equal Monthly Installment | Accounts and Finance |
| EMI | Emirau | Airport Code |
| EMI | Emergency Management Issues | Business Management |
| EMI | Emergency Management Institute’s | Business Management |
| EMI | Electromagnetic Interface | Military and Defence |
EMI Frequently Asked Questions
What is the Full Form of EMI?
Ans. EMI Full Form is Equated Monthly Installment.
What is the EMI Full Form in Hindi?
Ans. The Full Form of EMI in Hindi is “समान मासिक किस्त“.
What is the formula to calculate EMI?
Ans. EMI formula is EMI = P x R x (1+R) ^N / [(1+R) ^N-1].
What is the meaning of N in the EMI formula?
Ans. N is the tenure in the number of months.
What is the meaning of P in the EMI Formula?
Ans. P is the loan amount or Principal Amount.
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