EMI Explained: How Principal, Interest Rate and Tenure Change Your Payment
Understand the moving parts behind an EMI and why a lower monthly payment can sometimes mean a higher total repayment.
What an EMI represents
An equated monthly instalment is the regular payment used to repay a loan over a defined period. Each payment contains both principal and interest.
The three inputs that matter most
Principal determines how much is borrowed, the interest rate determines the financing cost, and tenure determines how long the balance is spread across payments.
Lower EMI does not always mean lower cost
Extending the tenure can reduce the monthly payment while increasing the total interest paid over the life of the loan. Compare both affordability and total repayment before choosing a term.
Run more than one scenario
Test different down payments, interest rates and tenures. Scenario comparison makes the trade-off between monthly cash flow and total financing cost much easier to see.
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