EMI Full Form: Meaning, Definition, And Calculation Tips

In today’s day and age, it is very important to plan and monitor all aspects of your finances. This ensures that you make informed decisions and accomplish your financial goals. 

To achieve this, you should be well-versed in basic finance terms. One of the most important terms is EMI. If you have come across this word and want to learn more about the same, you are at the right place.

In this blog, we will explore the EMI definition, its key elements, why it is important for you, how EMI is calculated and how you can do EMI calculation.

What is EMI?

When you take a personal loan from an NBFC or a bank the sum of the borrowed amount and interest is divided into smaller amounts that you are supposed to pay at regular intervals. When you have to repay this amount of loan on a monthly basis, it is called an EMI.

Normally, the EMI amount is the same throughout the loan tenure. When the personal loan repayment period starts, a bigger part of the EMI is used to pay off the interest amount. Gradually, its portion in the EMI sum decreases and the principal amount increases. 

There are many factors that you should consider before deciding the EMI amount and repayment tenure like your income, expenses, existing debts, type of loan, savings, upcoming expenses, loan terms and your financial goals.

Also Read: What is NBFC? What is the difference between Bank and NBFC?

EMI Full Form and Meaning of Other EMI Terms

The EMI full form is Equated Monthly Instalment. An “EMI plan” is a structured way to pay off a loan. This is something you need to select during the loan application process. For example – When you take a loan from Zype, you get the option to repay in 3, 6, 9 and 12 EMIs.

EMI tenure is the total time you would take to repay the loan amount. If you select the option of 9 EMIs, your loan tenure will be 9 months.

How to Calculate EMI (Equated Monthly Instalments)?

Now that you know the EMI meaning and full-form, here’s is the formula used to calculate the EMI amount, total payable amount and interest amount –

E = P x R x (1+R)^N / [(1+R)^N-1]


E is your loan EMI amount

P is the amount you are borrowing from the loan provider

R is the monthly interest rate

N is the number of months of EMI payment

For example – Let’s say you want to avail a personal loan of Rs. 3,00,000 for a period of 36 months at a monthly interest rate of 1%. Then,

P (loan amount) = Rs. 3,00,000

R (interest rate) = 1%

N (loan tenure) = 36 months

Thus, EMI = 300000 x 0.01 x (1+0.01)^36 / [(1+0.01)^36-1] = 8,462.43

So, your personal loan EMI amount would be around ₹8,462 for 36 months.

Key Elements of EMI (Equated Monthly Installment)

Loan Amount

Loan amount is the sum of money that you borrow from a bank or non-banking financial company which is the NBFC full form. When you apply for a loan by entering the required details and uploading required documents, the lender will give you a loan limit. For example – You can get a loan limit up to ₹5 lakhs on the Zype app. If you get a limit of ₹3 lakhs on Zype, you can choose a loan amount between ₹1000 and ₹3,00,000. The loan limit given to you by the lender depends on many factors like your income, existing debts, repayment history and credit policies. 

Interest Rate

When you take a loan, you have to repay it with a fee for borrowing money. That fee is called interest. An interest rate is the percentage of the loan amount that the lender would charge you. Different lenders charge different interest rates. 

For example – Interest rates on Zype personal loans start at 1.5% per month. Interest rate is determined by factors like the borrower’s creditworthiness, the lender’s credit policy and market conditions. 

Loan Tenure

It is also called loan term and loan duration. Loan tenure is a period over which you would repay your loan. It could range from a few months to a few years, depending on the type of loan and your preferences. If you choose a longer loan tenure, your EMI amount would be less but your interest cost will be high.  While a shorter tenure will result in a higher EMI amount and lower interest cost.

Must Read: Know the Maximum and Minimum Tenure for Personal Loan

Processing Fee

Lenders have to complete many activities in order to complete your loan application process and sanction your loan. The process involves profile evaluation, verification and other administrative tasks. The amount charged by lenders to cover these expenses is called processing fees. The processing fee levied could be a fixed amount or a percentage of the loan amount. 

Prepayment Charges

If you want to pay off your dues and close the loan before the tenure ends, lenders might charge a fee which is called prepayment charges or foreclosure charges. You should check this in the loan terms before getting a loan. These charges depend on the lender and type of loan. Zype does not charge any prepayment charges if you want to repay your loan in advance. 

Features & Benefits of Loan EMI

Helps to Budget Better

You can manage your finances more effectively by choosing the right EMI option. This ensures that you can repay loans with ease and manage your debt without any hassle.

Increases Affordability

EMI makes it easy for you to buy expensive products and pay them back in small chunks without straining your wallet.

Builds Credit Score

If you pay your EMIs on time, your credit score goes up and lenders consider you as a more responsible borrower.

Convenience of Automatic Payments

Many loan apps like Zype give the option of setting up auto-pay. This ensures that you never miss a due date. It saves you from late fees, and helps you in maintaining a strong credit profile. 

Helps in Achieving Financial Goals

EMI enables you to manage your planned and unexpected expenses with ease. This saves you from dipping into your savings and investments. Thereby helping you to stay on track with your financial goals.

Types of EMI Loans

Personal Loan

A personal loan is a type of loan provided by Banks and NBFCs where you can borrow money for your personal use. It is a no-questions-asked loan and you can use the money for anything you want. Personal loans are usually unsecured loans which means that you can get the funds without pledging any collateral.

Business Loan

As the name suggests, a business loan is a financial product to provide access to money for businesses. This loan could help the business in many activities like expansion, purchasing equipment, managing cash flow, etc. A business loan can be secured as well as an unsecured loan. 

Two Wheeler Loan 

Financial institutions provide two-wheeler loans to individuals who want to borrow money to buy a scooter or motorcycle. This is a very useful loan product for people who want to pay for their vehicle in small chunks over a period of time.

Home Loan

A home loan is a secured loan that is used to purchase or construct a residential property. In India, property like a house or land is mostly used as collateral for home loans. Compared to other loans, home loans charge low-interest rates and provide long repayment tenure options. 

Also Read: Get Home Renovation Loan from Zype!

Car Loan

A car loan is a type of EMI loan that you can avail to purchase an automobile. You can buy new and second-hand cars by using this credit facility. The vehicle you buy serves as collateral for the loan. If you default on your EMIs, the loan company has the right to possess the car.

What is an EMI calculator?

An EMI calculator is a tool that a borrower can use to know the monthly instalment amount they would need to pay for different loan tenures. It is very easy to use an perosnal loan EMI calculator. You need to enter the loan amount, the annual interest rate charged by the lender and the repayment period. The EMI calculator will instantly show you the EMI amount.

You should always do EMI calculation before taking a loan. This will help you to decide on a tenure and EMI amount that fits with your budget. An EMI calculator can only give you an estimated EMI amount as it doesn’t consider factors like processing fees and taxes.

4 Advantages of Using an EMI Calculator

User-Friendly Tool

It is extremely easy and fast to use an EMI calculator. You just need to enter your loan amount, interest rate and tenure which takes less than a minute. And unlike manual calculation, there is no scope for error in EMI calculation via calculator if you enter the details correctly.

Helps in Budgeting

Once you have considered all the factors like your income, expenses and existing debts to decide the EMI amount you need, you can use the EMI calculator to determine the loan tenure that would go with it.

Helps in Choosing the Right Repayment Tenure

You can see how much EMI you would need to pay for different loan tenures by using the calculator. This helps you to choose the loan amount and repayment period which wouldn’t add a burden to your wallet. You can also compare loan offers of different lenders by using an EMI calculator.


When choosing an EMI plan, find a sweet spot between the amount that’s easy to repay and a tenure that doesn’t unnecessarily increase interest costs. If there is an option for a down-payment, you should pay a higher amount as it would reduce your overall loan cost.

If you are looking for an instant personal loan with flexible EMI options, download the Zype app now. You can take personal loans up to ₹5,00,000 and repay in 3, 6, 9 and 12 EMIs. Complete the loan application process under 8 minutes and get the money credited to your account in less than 24 hours.

Frequently Asked Question

What is the Full Form of EMI?

The EMI full form is “Equated monthly instalment.”

What are EMI types?

Two main types of EMI are “EMI in arrears” and “EMI in advance.” Under EMI in arrears, borrowers start paying a month after the loan is disbursed. 

While in EMI in advance, the customer pays the first instalment upfront which reduces loan and interest amount.

Is EMI Good or Bad?

EMI is a great way to manage your expenses. You can spread out the cost of expensive products and make them affordable for you.  Also, paying EMIs on time will increase your credit score which will make it easy for you to get credit products in future.

Is EMI Risky?

It’s not risky if you choose an EMI plan that you can easily repay on time and you have read the loan terms before taking a loan. 

How much EMI is Safe?

Your EMI amount plays a very crucial role in managing your finances. The amount that you can easily pay every month towards loan repayment is a safe EMI amount.

Can I Stop My EMI for 3 Months?

Whether you can pause your EMI or not depends on the loan terms. You can read the terms and conditions of your loan and reach out to your lender for more details.

Can I Pay EMI at One Time?

Most lenders allow their borrowers to pay the EMIs in a lump sum and close the loan before the tenure ends. They might charge a prepayment penalty if you want to pay your loans in advance.

What Happens If I Miss An EMI Payment?

You should never miss an EMI date. It could negatively affect your credit score and the lender can charge a late fee and interest on the overdue amount.

What Is The Purpose Of EMI In Financial Transactions?

EMI gives the convenience of breaking down big expenses into smaller and manageable monthly payments. EMIs are helpful when you don’t have money to pay for something in a lump sum.

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