Equated Monthly Installment - EMI

Loading the player...

What is an 'Equated Monthly Installment - EMI'

An equated monthly installment (EMI) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are used to pay off both interest and principal each month, so that over a specified number of years, the loan is paid off in full.

BREAKING DOWN 'Equated Monthly Installment - EMI'

With most common types of loans, such as real estate mortgages, the borrower makes fixed periodic payments to the lender over the course of several years with the goal of retiring the loan. EMIs differ from variable payment plans, in which the borrower is able to pay higher payment amounts at his or her discretion. In EMI plans, borrowers are usually only allowed one fixed payment amount each month.

The benefit of an EMI for borrowers is that they know precisely how much money they will need to pay toward their loan each month, making the personal budgeting process easier.

RELATED TERMS
  1. Installment Debt

    A loan that is repaid by the borrower in regular installments. ...
  2. Amortization Schedule

    A complete schedule of periodic blended loan payments, showing ...
  3. Accelerated Amortization

    Extra payments made towards paying down a mortgage principal. ...
  4. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  5. Modified Term Payment Plan

    A way to receive reverse mortgage proceeds where borrowers get ...
  6. Discount Points

    A type of prepaid interest mortgage borrowers can purchase that ...
Related Articles
  1. Credit & Loans

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  2. Credit & Loans

    Mortgage Basics: Costs

    By Lisa SmithPeople generally think about a mortgage in terms of the monthly payment. While that payment represents the amount of money needed each month to cover the debt on the property, the ...
  3. Credit & Loans

    How Interest Rates Work On A Mortgage

    A step-by-step explanation of the interest calculations, mortgage types, and how the loan is eventually "retired" – which means paid off.
  4. Home & Auto

    Understanding The Mortgage Payment Structure

    While a mortgage’s size and term set the baseline, the interest, taxes and insurance all influence the amount of the monthly payment.
  5. Professionals

    Amortization

    Amortization describes the paying off of debt in regular installments over a period of time.
  6. Credit & Loans

    What is an Amortization Schedule?

    An amortization schedule is a table that shows the amounts of principal and interest that comprise each loan payment.
  7. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  8. Credit & Loans

    How Regulations Protect Reverse Mortgage Borrowers

    They're complex animals, which is why there are government guidelines in place to protect borrowers.
  9. Home & Auto

    Interest-Only Loans

    Interest-only loans are a type of ARM in which the borrower is responsible for only paying mortgage interest and not principal during the introductory period until the loan reverts to a fixed, ...
  10. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
RELATED FAQS
  1. What is PMI, and does everyone need to pay it?

    Also known as "Primary Mortgage Insurance," PMI is the lenders (banks) protection in the event that you default on your primary ... Read Answer >>
  2. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ... Read Answer >>
  3. Will debt consolidation stop debt collectors and creditors from calling me?

    Explore different debt consolidation options. Learn the effect that different interest rates have on monthly payments and ... Read Answer >>
  4. What is the difference between a fixed annual percentage rate (APR) and a variable ...

    Fixed ARP and variable APR loans operate differently but serve the same purpose: to collect interest from a borrower so the ... Read Answer >>
  5. What are the pros and cons of getting installment credit to pay off your revolving ...

    Learn how installment credit can be used to pay off revolving debt as well as the advantages and disadvantages for each type ... Read Answer >>
  6. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
Hot Definitions
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  3. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center