What is EMI?

EMI stands for Equated Monthly Instalment. It is termed as one part of the earnings that goes out to clear an outstanding loan on item/product within a certain time frame. This money is paid usually on a fixed date, through cheque or online payment, every month.

In EMI, initially, the interest is higher than the principal amount. The three main factors affecting the EMI are:

— Loan amount

— Interest Rates

— Tenor

Generally, the EMI does not change during a tenor, but there are certain situations where it can change:

— Floating interest rates

— Loan prepayment

— Progressive EMIs

EMI is neither good nor bad, but it gives you the relaxation of repaying the loan in comfortable and easy installments. Goods and service tax (GST) is not applicable on it or on the interest paid, but is applicable on the processing fee and other fees charged by the seller.