When you plan to buy something expensive, such as a smartphone, TV, refrigerator, or even a bike, you may not always want to pay the entire amount at once. That’s where an EMI comes in. EMI, short for Equated Monthly Instalment, makes it easier to afford big purchases by spreading out the cost over a few months or years.
In this guide, we’ll explain what EMI means, how it works, how it is calculated, and how you can shop smartly using tools like the Bajaj Finserv Insta EMI Card.
What is EMI?
EMI stands for Equated Monthly Instalment. It’s the fixed amount you pay every month to repay a loan or a purchase. This amount includes both the principal (the original amount you borrowed) and the interest (the extra cost charged by the lender).
You usually pay EMIs on:
- Home loans
- Personal loans
- Car or bike loans
- Education loans
- Consumer durables (like phones, laptops, TVs, etc.)
Thanks to EMI plans, you can enjoy a product or service immediately and pay for it gradually.
How Does EMI Work?
When you opt for an EMI, the lender divides the total amount you owe into monthly payments. These payments are scheduled over a fixed tenure (which could be 3 months, 6 months, 12 months, or more). Each EMI includes:
- A portion of the principal
- A portion of the interest
At the beginning of your repayment, a higher portion of your EMI goes towards interest. Over time, a larger portion goes toward the principal. This is known as amortization.
Example of How EMI Works
Let’s say you buy a washing machine worth ₹24,000 using EMI over 12 months with an interest rate of 10% per year. Your EMI will include both:
- A part of the ₹24,000 (principal)
- The interest charged by the lender
This way, instead of paying ₹24,000 upfront, you can pay a fixed amount every month—say ₹2,112—until the total amount is paid off.
Types of EMI Plans
There are two main types of EMI plans:
1. Standard EMI (with interest)
This is the most common EMI plan. It includes both principal and interest. The interest rate depends on your credit score, the lender’s terms, and the type of loan.
2. Easy EMI with the Bajaj Finserv Insta EMI Card
The Bajaj Finserv Insta EMI Card lets you split your purchases into easy EMIs with:
- No credit card reuired
Minimal or zero down payment
Flexible tenure options from 3 to 60 months
Over 1.5 lakh partner stores and 1 million+ products
Zero to low interest cost depending on the offer
With this card, you can shop for gadgets, appliances, furniture, lifestyle products, and even pay for travel, insurance, and medical bills—all on easy EMIs.
How is EMI Calculated?
EMIs are calculated using a formula based on:
- Principal amount (P)
Interest rate per month (r)
Loan/tenure in months (n)
EMI Formula:
EMI=P×r×(1+r)n(1+r)n−1EMI = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1}EMI=(1+r)n−1P×r×(1+r)n
Example:
Let’s assume:
Loan amount (P) = ₹50,000
Annual interest rate = 12%
Monthly interest rate (r) = 12 / (12 × 100) = 0.01
Tenure (n) = 12 months
Now plug these into the formula:
EMI=50000×0.01×(1+0.01)12(1+0.01)12−1≈₹4,435EMI = \frac{50000 \times 0.01 \times (1 + 0.01)^{12}}{(1 + 0.01)^{12} - 1} \approx ₹4,435EMI=(1+0.01)12−150000×0.01×(1+0.01)12≈₹4,435
So, you’ll pay around ₹4,435 every month for a year to repay ₹50,000.
