EMI Full Form
The Full form of EMI is Equated Monthly Installment. EMI is a fixed amount payable by a borrower to a moneylender at a specific date of each month for a specific period of time.
EMI consists of a principal amount and interest amount that a borrower is supposed to pay to the lender over a specific number of years to pay off the loan in full. So, it is an unequal combination of principal and interest rate.
Read GPRS Full Form
The calculation of an EMI depends on three factors which are:-
Factors Depends On EMI
- Interest rate
- Principal amount borrowed
- Annual or monthly resting period
- Tenure of the loan
Loan Amount is the borrowed amount or also referred to as the principal amount, and the duration or tenure of the loan is the lender’s time to repay the whole loan along with interest. Lenders, for example, Bank charges an interest rate.
Benefits of EMI
- EMI helps individuals to buy outside their monetary control by allowing them to pay in installments.
- Flexibility, You can consider different EMI options offered by different banks and decide the amount that you want to pay as installments and can also choose the tenure of the loan as per your financial position.
- There is no intermediary and individuals pay the EMI directly to the lender without any hassle of contacting an intermediary.
- EMI does not impact the savings as they are required to pay minimum monthly payments instead of a lump sum.
- Protects Savings: It does not hurt your savings as you are required to pay minimum regular payments instead of a lump sum amount.
- The main benefit of EMI is that it offers the power to buy beyond its monetary reach, which allows it to pay in installments; there are no intermediaries; therefore, you pay the EMI directly to the creditor without the hassle of contacting an intermediary.
How Is EMI Deducted From a Credit Card?
As soon as you purchase something on a credit card with an EMI option (that is, doesn’t demand payment in full each month), your card’s available credit limit is reduced by the total cost of the goods or service.
The EMI on credit cards then works much like a home loan or a personal loan: You pay back the principal and interest each month, gradually reducing your debt over a period of time until you pay it off in full.
EMI is deducted from a credit card using the reduce-balance method.
Is EMI Good or Bad?
EMI is neither inherently good nor bad—unless you consider borrowing and accruing debt bad, and paying for things in full the only “good” option.
In terms of borrowing options, EMI does have its good points, though. Because it divides the debt into the same fixed payments each month, it helps borrowers budget their finances and keep in mind their outstanding obligations. They know how much they have to pay, and how long it will take them to settle their debt in full.
FAQ About EMI
How is EMI calculated?
The mathematical formula to calculate EMI is: EMI = P × r × (1 + r)n/((1 + r)n – 1) where P= Loan amount, r= interest rate, n=tenure in number of months. … The higher the loan amount or interest rate, the higher is the EMI payments and vice versa.
Is EMI good or bad?
Is an EMI scheme good or bad? Although a good EMI scheme is easy on your wallet, you must try to avoid it as the first option. You may not only be spending more than the actual worth of the product, but also splurging first and then relying on EMI payments is not healthy for your finances.
What is EMI processing fee?
Rate of Interest – 1.5% interest (Monthly Reducing Balance) b. Processing Fee – 1.5% or minimum of Rs.150/- whichever is higher. c. Service Tax – 18% on the above fees & interest charged.
Does EMI deducted automatically?
offer you the facility of making EMI Payments through your Debit Card. … Once your Savings or Current Account which is linked with your Debit Card is linked with the portal, your monthly payments will be deducted automatically.
Which bank is best for EMI?
ICICI Bank and Axis bank are the top 2 banks providing this offer. For the EI conversion process, one can ask the mercantile to swipe the card in EMI exchange mode and select a preferred tenure.
Who is eligible for debit card EMI?
EMI feature is available for any shopping transaction exceeding ₹ 10,000 at partnered stores. At present, this facility can be accessed by every ICICI Bank Savings Account holder and some Current Account users, provided that they have a recurring or fixed deposit (no less than Rs 10,000) linked to their account.