EMI stands for Equated Monthly Installment. It is a fixed amount of money you pay every month to repay a loan. The EMI includes both the principal (the loan amount) and the interest combined into one monthly payment. Simply put, EMI is the monthly payment for any loan you take.

Example:

If you take a loan of ₹1,00,000 to buy a bike and your EMI is ₹5,000, you will pay  ₹5,000 every month until the loan is fully paid.

How to understand EMI:

EMIs make it easier to buy expensive things by breaking the cost into smaller monthly  payments.

Knowing your EMI helps you plan your budget better since you know exactly how much to  pay each month.

Importance of EMI:

EMIs allow you to buy things like homes and cars without needing all the money upfront.

Paying EMIs on time helps build your credit score.