Process Of EMI Break Up In Personal Loan

by Bhavna S. Financial Advisor

Today, loans have become an integral part of our lives, and we are very much dependent on it to achieve some important goals in our lives. From buying a car to buying a house, we all are in between the boundaries of the personal loans in one way or the other. But taking a loan also means the repayment, and when we talk about repayment, we have a term called ‘EMI’ which is very much associated with the loan. So, let us find out what is EMI and how we can break up the EMI in personal loan.

What Is EMI?

EMI, which stands for ‘Equated Monthly Instalment’, is the monthly amount that we pay towards the loan that we have taken. The EMI payments are the sum of both the principal amount and the interest which are applicable to the loan amount. Every loan, be it a home loan or a personal loan comes with the concept of EMI. For a personal loan, a Personal Loan EMI Calculator is used to calculate the EMI.

What Is EMI Break Up?

As mentioned earlier, EMI payments include both the principal component and the interest which is directly applicable to the loan. The interest component constitutes the major portion of the EMI payment for the initial stage of the tenure. While as the years go on the portion of the interest repayment witness a decline whereas the contribution towards the principal repayment increases. This entire concept is known as EMI Break Up.

Let us consider an example to get a better insight into this concept. Suppose you have taken a personal loan of 5 Lakhs for a tenure of 1 year at an interest rate of 15%. Thus, the EMI for this case is Rs. 45,129, i.e. you will have to pay this amount every month. This amount gets split into two components of principal and interest repayment as shown below:

Month	Principal	Interest	EMI	Principal Component	Interest Component
1	38,879	6,250	45,129	86%	14%
2	39,365	5,764	45,129	87%	13%
3	39,857	5,272	45,129	88%	12%
4	40,355	4,774	45,129	89%	11%
5	40,860	4,269	45,129	90%	10%

Thus, in a similar pattern, the principal component goes on increasing while the interest component goes on decreasing.

Personal Loan EMI Calculator

Now the next question arises how to calculate the EMI? Well, these days it is effortless to calculate the EMI. There is a platform called ‘Personal Loan EMI Calculator’ which is available online at different websites through which one can check or calculate the EMI. These platforms are easy to use and are available free of cost.

Further, if you do not have access to the internet, then you can use the conventional method to calculate the EMI which is

EMI = (Principal*Interest) * (1+ Interest Rate)n / (1+ Interest Rate)(n-1)

Where interest rate represents the monthly interest and n represent the tenure in months.

Thus, you can use any of the methods to calculate the EMI. Moreover, the Personal Loan EMI Calculator is the easiest and fastest method to do so, and various platforms offer this facility for free. All you need is to enter the correct values of tenure, interest rate and principal amount.