Overview of Equated Monthly Instalments

Equated Monthly installments, better known as EMIs, are a great way to repay loans in a regular and timely fashion.. It is defined as the fixed amount paid by a borrower on a monthly basis to the lender. The EMI amount includes fractions of both principal and interest, to be repaid over a pre-defined tenure on a fixed date of every month, until the loan amount has been repaid in full.

Benefits of EMIs

• EMIs provide borrowers with the power to purchase items that may be beyond your budgetary considerations. With the help of EMIs, it is now possible for people with low salaries and incomes to buy luxury items and afford holidays previously unthinkable. And, EMIs have positive impact both ways – traders are selling more items than ever.

• EMIs are especially important when buying very pricey things such as a house, which would otherwise be beyond the dreams of a common man.

• EMIs usually come with low interest rates if you are prompt in making the monthly payments. When you repay credit through EMIs without any breaks, your credit score is affected positively, thereby making you eligible for more credit.

• Let’s say you are taking a personal loan. Making personal loan EMI calculations is a breeze, and this gives you greater flexibility in deciding products from various companies that let you borrow money.

Disadvantages of EMI

• EMIs generally imply a long term debt. Home loans may drag on to 20 years or more, and a car you purchased 5 years back may very well still be burning a hole in your pocket. As such, you should always consider the longevity of the repayment tenure before applying for EMI payments of your credit.

• A lot of repayment schedules are structured with fixed EMIs, without the option for pre-payment. What this means is that you cannot pay a lump sum to clear off your dues – you have to slog through the entire tenure by making monthly payments until the debt is cleared. Some credit types such as personal loans provide option for pre-payment but levy extra charges when you do so.

• If you miss an EMI payment for a month, it is likely to have serious implications for your overall credit rating. Financial institutions place a lot of value on prompt and regular repayment history of an applicant, and missing EMI payments is a sure shot way to reduce your chances of borrowing more money in the future.

Calculating personal loan EMIs

Calculating the EMI instalments on your personal loan is a simple task if you have the perfect tool at hand. Now, you can simply browse the internet for dedicated personal loan EMI calculators that provide you with a multitude of options in terms of amount, tenure, rates and fees. You can mix-and-match different values to find the best EMI value that you are comfortable with paying every month.

In general, a personal loan EMI Calculator will have fields depicting loan amount, tenure, and related rates and charges. On entering the relevant values you can see EMI numbers as well as amortization details – the amount of outstanding loan money you have to repay at any point of the repayment tenure.