What is Pre-EMI and How to Calculate It?

Pre EMI, or Pre-Equated Monthly Instalment, is a repayment option provided by lenders during the early stage of a loan. The pre-EMI meaning refers to paying only the interest on the disbursed loan amount, without repaying the principal.

Pre-EMI is more popular in home loans, especially in India. This is common during the construction phase of a property, where borrowers make smaller payments until the project is completed. But, if you are looking for a personal loan with a pre-EMI benefit, then you can opt for our Flexi Hybrid Term Loan. With this loan option, borrowers are only required to pay only the interest as EMI during the initial tenure, and the principal with interest repayment starts only after the initial period ends.

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To further understand and plan pre-EMI payments effectively, borrowers can utilise an EMI calculator. An EMI calculator is a handy tool that helps borrowers estimate their monthly instalment payments based on the loan amount, interest rate, and tenure. By inputting these parameters into the calculator, borrowers can get an accurate projection of their pre-EMI and regular EMI payments, enabling them to make informed financial decisions and plan their loan repayment strategy effectively.

Here are a few explanations of why a Flexi Hybrid Term Loan is a good option for handling your large expenses:

• With Flexi Hybrid Term Loans, you have the freedom to make as many withdrawals as you like from your approved loan limit
• Interest will only be applied to the loan amount you borrowed, and not to the total amount that was sanctioned
• With Flexi Hybrid Term Loans you also get the benefit of paying interest-only EMIs during the initial tenure, this lowers your repayment burden initially
• There are no additional forms to fill out when withdrawing or paying off the loan amount
• You can borrow and prepay as per convenience at no extra charge
• You can even shorten your loan’s tenure by paying back a portion of the principal amount whenever you have extra funds with zero pre-payment charges
• Flexi Hybrid Term Loans do not demand collateral to receive the loan amount

A Flexi Hybrid Term Loan is different from a standard personal loan in quite a few ways. Unlike a regular personal loan where you can only borrow once and pay back a fixed EMI for the selected tenure, a Flexi Hybrid Term Loan gives you greater flexibility. With a Flexi Hybrid Term Loan you have the option to borrow money from your sanctioned loan limit as many times as you wish and prepay the loan at your convenience within the selected tenure. Here, interest is only charged on the amount that was withdrawn and not on the total loan amount that was approved. Flexi Hybrid Term Loan also come with the added benefit of paying interest-only EMIs for the initial loan period.

Use only what you need

• With a Flexi Hybrid Term Loan, you are approved for a defined loan amount. For example, Rs. 5 lakh.
• You can withdraw from this approved loan amount whatever sum you may need. For example, on a given day, you withdraw Rs. 2 lakh and choose to pay this back over two years.
• Rs. 3 lakh continues to stay pre-approved for you and you have the freedom to withdraw Rs. 3 lakh or less whenever you need to.
   

Pay interest only on what you’ve withdrawn

• In a Flexi Hybrid Term Loan, the interest is charged only on the amount you have withdrawn from your pre-approved loan amount. For example, if you withdrew Rs. 2 lakh, you will be charged interest only on that amount.
• Compared to this, in a term loan, you would have had to pay the interest on the entire amount that you would have borrowed. For example, Rs. 5 lakh for two years.
   

Withdraw as many times as you want, prepay as many times as you’d like

• With our Flexi Hybrid Term Loan, you have the flexibility to withdraw from your sanctioned loan amount as many times as you’d like over the tenure of the loan. For example, after withdrawing Rs. 2 lakh initially, you may withdraw another Rs. 1 lakh three months later.
• Additionally, you can choose to pay back a part of what you’ve borrowed. For example, you borrowed Rs. 3 lakh. (Rs. 2 lakh initially + Rs. 1 lakh three months later).
• You can pay back Rs. 50,000 six months later, another Rs. 2 lakh next month itself, and the rest, at the end of two years. This is just one illustration. You can enjoy the flexibility of many such permutations and combinations as per your preference.

Pre-EMI is calculated based on the interest payable on the disbursed loan amount during the pre-EMI period. Below are the steps to compute pre-EMI with an example for better clarity:
 

Formula for Pre-EMI Calculation:

1. Pre-EMI Interest = Loan Amount × Monthly Interest Rate
2. Total Pre-EMI Amount = Pre-EMI Interest × Number of Months
3. Total Repayment Amount = Loan Amount + Total Pre-EMI Amount
    

Example:

For a loan of Rs. 1,00,000 at an annual interest rate of 12% with a pre-EMI period of 3 months:

During the 3-month pre-EMI period, you pay Rs. 3,000 as interest, after which regular EMIs (covering both principal and interest) begin.

Full EMI (Equated Monthly Instalment) is the monthly repayment towards a loan that includes both the principal amount and the interest. It starts once the entire loan is disbursed, usually after the property is fully constructed or handed over to the borrower.

Key Differences Between Full EMI and Pre-EMI

Pre-EMI vs Flexi Hybrid Term Loan: Both options cater to different borrowing needs but share a common goal—offering greater flexibility, interest savings, and repayment control.
 

1. Pre-EMI Loan

• You initially pay only the interest component of your loan.
• Full EMIs (principal + interest) begin later, easing your financial burden in the early stages.
• Ideal if you want to manage your cash flow efficiently while keeping monthly outgo lower.
• Helps in better financial planning, especially when combined with a favourable personal loan interest rate.
   

2. Flexi Hybrid Term Loan

• Offers a pre-approved credit limit that allows withdrawals as per individual requirements.
• Interest-only EMIs are applicable during the initial part of the tenure, and EMIs are charged only on the amount withdrawn from your sanctioned limit.
• You can make part-prepayments without any additional charges.
• Enables easy fund access without multiple loan applications—perfect for handling fluctuating or unexpected expenses.
   

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Opting for a Pre-EMI structure can directly influence both your loan tenure and the personal loan interest rate you end up paying over time.

• Initial Phase: In the early stage, you pay only the interest component on the disbursed amount. This keeps your EMIs lower and helps manage cash flow effectively, especially if you’re waiting for full loan utilisation.
• Transition to Full EMI: Once the complete loan amount is disbursed, you start paying full EMIs that include both principal and interest. This means the repayment tenure officially begins at that point.
• Impact on total interest: While Pre-EMI offers short-term relief, it can slightly increase the overall interest paid, since the principal repayment starts later. However, it provides flexibility during the initial phase when managing expenses may be a priority.

By understanding how Pre-EMI works, borrowers can plan better—balancing immediate affordability with long-term savings on their personal loan interest rate.

Pre-EMI emerges as a beacon of financial relief, offering lower initial EMIs and tax benefits to borrowers. However, Choosing a Flexi Hybrid Term Loan over a traditional loan with pre-EMI offers compelling advantages. Its flexibility in repayment, lower initial payments, and potential interest savings make it an attractive option. With simple personal loan eligibility and documents, customisable repayment schedules and the ability to mitigate income fluctuations, borrowers gain greater control over their finances. Additionally, reduced overall borrowing costs further sweeten the deal. In a world where financial circumstances can change rapidly, the adaptability and cost-effectiveness of Flexi Hybrid Term Loan make them a prudent choice for borrowers seeking financial stability and control.

Conclusion

Flexi Hybrid Term Loans combine convenience and financial adaptability, making them an excellent alternative to traditional loans. Whether you're managing home or personal loan repayments, their customisable schedules and reduced borrowing costs empower borrowers with control and stability. These features ensure optimal financial management, catering to ever-changing income and expense dynamics.