What Is An Equated Monthly Installment or EMI?

If you have been looking for a loan(regardless of purpose), you may have come across the acronym EMI which stands for equated monthly installment.  Equate Monthly Installment, is a more specific and technically correct way of talking about your monthly loan payments.  A person's EMI is typically a fixed payment made to the lender by the borrower on a monthly basis.  So if a person had a mortgage and they made payments in a fixed amount each month, this could be considered and equated monthly installment.  

Equated monthly installments will typically be split into two parts.  First part of the payment will go towards paying down the principal.  The other part of the payment will go toward paying the lender interest.  Again, this is similar to a mortgage loan where payments are made with part of the payment going towards principal and interest with the goal of retiring the loan at the end of the amortization schedule.

The most common way that an equated monthly installment is calculated is the same way a monthly payment would be calculated on a mortgage:

P = L[r(1 + rn] / [(1 + r)- 1]

Where P = Monthly Payment  

L = Loan Amount  

n = Number of Payments/Months

r = Interest Rate

That is the equation or formula that is typically used to calculate a peron's mortgage payment.  

It is not typical to hear someone in the United States refer to a person's loan payment as an equated monthly installment.  Rather, you'll hear lenders refer to this as a person's monthly loan payment, or monthly mortgage payment.  Other related(not equivalent) terms that are common in the United States would include mortgage, amortization, and fixed interest loan or payment.  

A quick Google search for an EMI calculator reveals that most of the results come from companies in Inda, where the term is probably more common.  For example, ICICI bank is one of the top results and it claims to be India's largest private bank.  


Don't be confused by the term EMI or equated monthly installment.  In most cases, it should be considered the equivalent term of monthly loan payment or monthly mortgage payment.  However, in some cases, different calculations and formulas can be used to calculate an EMI, but in most cases it is calculated the same way a monthly fixed mortgage payment will be calculated.  

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