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What is an EMI (equated monthly installment)?
Quick answer
An EMI, or equated monthly installment, is the fixed amount you pay every month to repay a loan — covering both the borrowed principal and the interest. It lets you buy something big now (a phone, a bike, a home) and spread the cost over months or years.
Key things to understand
- A fixed monthly payment that repays a loan.
- Each EMI is part principal and part interest.
- It spreads a big purchase over time.
- Longer tenure means smaller EMIs but more total interest.
People also ask
How is an EMI calculated?
From the loan amount, the interest rate, and the tenure in months — a standard formula splits each payment into principal and interest.
Is a longer EMI tenure better?
It lowers the monthly amount but increases the total interest you pay, so the purchase costs more overall.
What happens if I miss an EMI?
You're charged a late fee, your credit score drops, and repeated misses can let the lender recover the asset.
Part of the guide: Money Basics: Save, Borrow & Invest →