Monthly Loan

A monthly loan refers to a loan where the borrower repays the principal and interest in equal monthly installments, known as Equated Monthly Installments (EMIs). These installments cover both the loan's principal amount and the accrued interest over the loan's term.

Here's a more detailed explanation:

• Equated Monthly Installment (EMI):

  This is the fixed monthly payment made by the borrower to the lender until the loan is fully repaid.

• Principal and Interest:

  The EMI is structured to include both a portion of the principal amount (the original loan amount) and the interest charged by the lender.

• Loan Tenure:

  The loan term is the duration over which the loan is repaid, and the EMI is calculated based on this tenure.

• Purpose:

  EMIs are commonly used for various types of loans like home loans, car loans, and personal loans.

• Calculation:

  Lenders typically use a formula to calculate the EMI based on the loan amount, interest rate, and loan tenure.

• Impact of Interest:

  The interest component of the EMI decreases over time, while the principal component increases as the loan gets closer to maturity.