EMI full form: Equated Monthly Instalment

How to say it: letter by letter.

EMI stands for Equated Monthly Instalment. It is the fixed amount a borrower pays to the lender every month until a loan is fully repaid. "Equated" means made equal: the instalment is the same each month, which makes it easy to plan for.

What is inside an EMI

Every instalment has two parts: interest on the amount still owed, and repayment of part of the loan itself, called the principal. In the early months most of the EMI is interest, because the amount owed is large. As the loan is paid down, the interest part shrinks and the principal part grows, though the total stays the same.

What decides the size of an EMI

• The loan amount. A bigger loan means a bigger EMI.
• The rate of interest. A higher rate means a bigger EMI.
• The tenure, or number of months. A longer tenure makes each EMI smaller but increases the total interest paid over the life of the loan.

The formula

EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the loan amount, r is the monthly interest rate (the yearly rate divided by 12 and by 100) and n is the number of months. For example, a loan of 1,00,000 at 12 percent a year for 12 months has r = 0.01 and an EMI of about 8,885. Twelve such payments come to about 1,06,619, so the interest is about 6,619.

"No-cost EMI"

Shops and websites advertise no-cost EMI. Read the terms: the interest may be built into the price, or a processing fee may be charged. Compare the total you will pay with the price for paying at once.

Related full forms

• ROI: Rate of Interest.
• NACH: National Automated Clearing House, the system that collects EMIs from bank accounts.
• CIBIL: the credit bureau whose score lenders check; missed EMIs lower it.

More banking full forms

• IMPS Immediate Payment Service
• UPI Unified Payments Interface
• NPCI National Payments Corporation of India
• KYC Know Your Customer
• PAN Permanent Account Number
• TAN Tax Deduction and Collection Account Number
• GST Goods and Services Tax
• GSTIN Goods and Services Tax Identification Number

All banking, tax and money Next: KYC explained

Check what matters. These pages explain names and terms in general. Rules, dates, fees and limits change: take them from the official body. Read on 12 November 2026.