EMI, or Equated Monthly Installment, refers to the fixed amount a borrower pays every month to a lender—such as a bank or financial institution—until the loan is completely repaid. Each EMI consists of two parts:
Principal: A portion of the original loan amount
Interest: The charge on the outstanding principal based on the loan’s interest rate
The total repayment (principal + interest) is divided evenly across the loan tenure, expressed in months. Although the EMI value typically remains constant throughout the tenure (for fixed-rate loans), the interest portion is higher at the beginning, and gradually decreases as more of the principal gets paid down over time. This shift in proportion happens even though your EMI remains the same.

Understanding EMI with Floating Interest Rates
When it comes to floating or variable interest rate loans, calculating EMI becomes slightly more complex due to potential fluctuations in the rate over time. Unlike fixed interest loans, the rate here can go up or down depending on market conditions and regulatory decisions (e.g., by the Reserve Bank of India).
Since the interest rate is not in the borrower’s control, it’s advisable to prepare for a range of scenarios before taking the loan.
✅ Key Components You Control:
Loan Amount: How much you borrow
Loan Tenure: The duration you choose to repay the loan
❗ Factor Beyond Your Control:
Interest Rate: This is set by lenders, and influenced by RBI policies and economic conditions.