The EMI Full Form: Explained In Simple Terms 4 you
EMI Full Form is Equated Monthly Instalment. It is a term used in the Indian banking and financial sector to refer to a loan repayment plan in which the borrower’s monthly repayments are calculated as a proportion of his/her salary.
This is a type of loan payment structure that has a fixed interest rate and can be used for a variety of purposes. EMI is a type of financing that is set up to pay back the loan in equal installments over a set period of time. This is different from an interest-only mortgage (IO) in which the borrower pays only the interest on the loan and nothing towards the principal.
EMI full form || What is the EMI?
An EMI is a part of the repayment obligation on your outstanding loan amount. The repayment amount starts accumulating after the loan amount has been borrowed and continues to grow with your due balance. The EMI amount is just that – the amount of money you must pay for the ratio that has been borrowed from a financial institution.
The EMI is an interest-free installment that has to be paid in full at the end of the tenure of your loan amount. This has to be done before the rest of the dues are cleared, or it will remain as an unpaid amount. An EMI can also be extended to pay off the outstanding balance if the primary borrower falls in the red.
full form of EMI || What are the different factors that affect the EMI?
The principal has taken: The principal that is being borrowed is usually the most fundamental factor that significantly impacts the monthly installment paid by the borrower. The difference between the principal borrowed and the amount paid off from the loan can either be positive (where the principal paid off makes up for all the interest earned) or negative (where the principal repayment is less than the principal borrowed).
Rate of interest: This factor describes the prevailing rate of interest on the loan. It can be stated as the interest calculated by the EMI provider or can be calculated by the lender as per the loan rates provided by the latter.
Tenure of the loan: The tenure of the loan helps in comparing the tenure of repayment versus the term of the loan.
EMI ka full form || What are the advantages of the EMI?
- EMI is a win-win situation
- EMI is suitable for both the borrower and the lender
- EMI is simple to understand
- EMI is readily accepted by the borrowers
- EMI attracts several loaners who are satisfied with the monthly payment
- EMI is preferred by low-income earners Consent required from borrowers Under Section 16 (4) of the Punjab National Bank (PNB) Act (1851), 1995 (Act No. 11 of 1995) and Rules 22(1)(d), 31 (1)(d), 74 (1)(d), 81(1)(d) and 108 (1), it is mandatory for borrowers whom the NBFC has approved to disclose a monthly installment (EMI) from the time of loan approval till the end of the financial year. In addition, the borrowers must also disclose the charges for the loan (if any) as per the published rate schedule.
EMI full form in Hindi || What are the disadvantages of the EMI?
The duration of the EMI is also a significant disadvantage, which can be either waived or reduced for the good of the borrower. For instance, if your monthly EMI exceeds a year, a repayment window of six months may be extended to one year. On the other hand, your EMI cannot be waived or reduced if your principal is repaid in the shortest possible period. You have to pay interest on your EMI for the entire tenure.
This is not an issue if your principal was paid in full within the tenor of the loan, but this may be the case if it was a loan that was disbursed in two parts. Even if you have borrowed a relatively long tenor loan, the interest rate may still be high, which you must carefully consider. What is an EMI-free loan?
EMI full form in banking || How do I calculate the EMI?
Eligible loans falling under a credit score of 680 and above, or 90 days EMI as on the date of disbursal, are eligible for EMI calculation. They include:
Home loan – This loan is considered as a secured loan. Its EMI is calculated with the principal amount (with or without penalties) as the loan amount and the term to be repaid divided by the total principal amount.
Personal Loan – As a personal loan, it is considered an unsecured loan, and thus, no principal payment is to be made. The loan amount (in all other cases, such as Home Loan EMI) is calculated with the number of months of principal and interest to be paid divided by the total principal amount.
EMI full form || Conclusion
The EMI works like an interest charge to the borrower. The EMI calculated as part of your monthly/annual budget must be paid in full within the stipulated period. The period is generally one year in lenders’ case, termed the rest period of the loan. Lenders deduct the EMI during the rest period and pay it off at the time of the disbursal of the loan.
The EMI is inclusive of all the interest charges. Thus, it’s to prevent going into an ILC or an IELC from taking over the repayment of the EMI. The lender will decide to which category the loan will be classified. This classification will determine the quantum of the loan amount that will be disbursed based on the EMI being paid.
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