EMI

Meaning : 

EMI, or Equated Monthly Installment, is defined as a fixed amount of money paid monthly to repay a loan.                This installment encompasses both the principal (the original loan amount) and the interest, resulting in a single monthly payment structure.

Example :

For instance, if an individual takes an education loan of ₹3,00,000 with an EMI of ₹6,000, they will consistently pay ₹6,000 each month until the loan is fully repaid.

Importance of EMI:

EMIs support economic growth by enhancing consumer buying power, leading to increased spending and investment in the economy.

Consistently paying EMIs on time contributes positively to an individual's credit score, which  is crucial for future borrowing.

Types of EMI:

Fixed EMI: The amount remains constant throughout the loan tenure.

Flexible EMI: The EMI may vary based on changes in interest rates.

Pre-EMI: Only interest is paid until the full loan amount is disbursed, common in home  construction loans.

Zero-Cost EMI: No extra interest is charged; the customer pays only the product cost, often  seen in online shopping.

Step-Up EMI: EMIs start low and gradually increase, suitable for those expecting higher  future income.

Step-Down EMI: EMIs start high and decrease over time, benefiting those seeking early  repayment.

How EMI Is Evolving:

Digital loan platforms are offering instant EMI approvals, making the process faster and more accessible.

Buy Now, Pay Later (BNPL) schemes convert small purchases into manageable EMIs.

UPI-based loans provide EMIs with auto-debit features for convenience.

AI-based eligibility checks are streamlining the loan approval process.

Flexible EMI options are emerging based on customer spending patterns.

Online EMI calculators help customers plan their finances more effectively.

Micro-EMIs are being introduced for small-ticket products like gadgets and appliances.

Overall, EMIs are becoming faster, more digital, flexible, and customer-friendly.