Question 1

What is EMI?

Accepted Answer

EMI (Equated Monthly Installment) is a fixed payment amount made by a borrower to a lender at a specified date each month. It includes both principal and interest components.

Question 2

How is EMI calculated?

Accepted Answer

EMI is calculated using the formula: EMI = [P × R × (1+R)^N] / [(1+R)^N-1], where P is principal, R is monthly interest rate, and N is number of monthly installments.

Question 3

Does EMI include interest?

Accepted Answer

Yes, EMI consists of both principal repayment and interest payment. Initially, the interest component is higher, which gradually decreases over the loan tenure.

Question 4

How can I reduce my EMI?

Accepted Answer

You can reduce EMI by making a larger down payment, choosing a longer tenure, negotiating a lower interest rate, or making prepayments when possible.

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