Know about EMI-Important message to all cg employees and others
All you wanted to know about EMI Be it a home loan, personal loan, education loan or a vehicle loan, the equated monthly installment (EMI) i...
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All you wanted to know about EMI
Be it a home loan, personal loan, education loan or a vehicle loan, the equated monthly installment (EMI) is the monthly payment a borrower is expected to make month after month.
The first question that typically pops up in any prospective borrower's mind is the quantum of EMI.
COMPONENTS OF EMI
EMI is made up of two components - the interest and the principal. During the initial years of loan repayment , significant portions of the monthly EMIs are interest payments.
The principal repayment is much less. This pattern reverses towards the end of the loan tenure.
FACTORS THAT IMPACT EMI
There are four major factors that have a direct bearing on a borrower's EMI outflow .
Interest rate: The EMI outflow of a borrower paying a higher rate of interest will be higher compared to a borrower locked-in at a significantly lower rate.
Tenure: Borrowers who opt for a short tenure loan repay their dues faster. However , their monthly EMI outflow is significantly high. Borrowers repaying over a longer tenure have smaller monthly EMI commitments.
Borrowed money: People who have borrowed high amounts have to pay significantly higher EMIs. Greater the principal amount, larger is the EMI.
MANAGING EMIs
Sometimes, EMI payments become quite a burden. This is especially true when the borrower has, for some reason , lost his regular source of income.
The easiest way to reduce the EMI burden is to increase the loan tenure. When loan tenure is increased, the monthly EMI outflow comes down automatically.
Borrowers can also prepay a part of the loan, if there are some surplus funds available. This also results in a reduction of monthly EMI outflow.
Curb wasteful expenditure and unwanted luxuries. Avoid indulging in more debts. Indiscriminate borrowing could lead you in to a debt trap and financial chaos.
Talk to the lender about your financial position and explore if there is a more convenient repayment plan.
EMI AND TENURE
When the loan tenure is longer, the monthly EMI amount comes down considerably . On the contrary, a short loan tenure translates into higher monthly EMI payments. EMI and loan tenure are thus inversely proportional.
If a borrower has taken a loan of Rs 10 lakhs for a tenure of 20 years at nine percent interest, his monthly EMI outflow will be Rs 8,997. If the borrower has taken the same money for a tenure of five years, his EMI outflow would be Rs 20,758.
In longer tenure loans, the cost of borrowing money is higher
SOURCE;The Economic Times
Be it a home loan, personal loan, education loan or a vehicle loan, the equated monthly installment (EMI) is the monthly payment a borrower is expected to make month after month.
The first question that typically pops up in any prospective borrower's mind is the quantum of EMI.
COMPONENTS OF EMI
EMI is made up of two components - the interest and the principal. During the initial years of loan repayment , significant portions of the monthly EMIs are interest payments.
The principal repayment is much less. This pattern reverses towards the end of the loan tenure.
FACTORS THAT IMPACT EMI
There are four major factors that have a direct bearing on a borrower's EMI outflow .
Interest rate: The EMI outflow of a borrower paying a higher rate of interest will be higher compared to a borrower locked-in at a significantly lower rate.
Tenure: Borrowers who opt for a short tenure loan repay their dues faster. However , their monthly EMI outflow is significantly high. Borrowers repaying over a longer tenure have smaller monthly EMI commitments.
Borrowed money: People who have borrowed high amounts have to pay significantly higher EMIs. Greater the principal amount, larger is the EMI.
MANAGING EMIs
Sometimes, EMI payments become quite a burden. This is especially true when the borrower has, for some reason , lost his regular source of income.
The easiest way to reduce the EMI burden is to increase the loan tenure. When loan tenure is increased, the monthly EMI outflow comes down automatically.
Borrowers can also prepay a part of the loan, if there are some surplus funds available. This also results in a reduction of monthly EMI outflow.
Curb wasteful expenditure and unwanted luxuries. Avoid indulging in more debts. Indiscriminate borrowing could lead you in to a debt trap and financial chaos.
Talk to the lender about your financial position and explore if there is a more convenient repayment plan.
EMI AND TENURE
When the loan tenure is longer, the monthly EMI amount comes down considerably . On the contrary, a short loan tenure translates into higher monthly EMI payments. EMI and loan tenure are thus inversely proportional.
If a borrower has taken a loan of Rs 10 lakhs for a tenure of 20 years at nine percent interest, his monthly EMI outflow will be Rs 8,997. If the borrower has taken the same money for a tenure of five years, his EMI outflow would be Rs 20,758.
In longer tenure loans, the cost of borrowing money is higher
SOURCE;The Economic Times
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