# What is EMI?

### ðŸ‘‰ðŸ‘‰ðŸ‘‰ https://www.dyclassroom.com/money/what-is-emi

EMI or Equated Monthly Instalment is a fixed amount of money paid by a borrower to a lender every month at a specified date to pay off a loan in a given time period.

## What are the factors that decide an EMI?

EMI is dependent on the following factors.

- Principal – the amount borrowed
- Rate of Interest
- Tenure of the loan

An EMI is made up of a certain amount of the Principal borrowed and a certain amount of Interest.

EMI = Interest Component + Principal Component

The first EMI has the highest interest component and lowest principal component.

With every instalment, the interest component decreases and principal component increases.

The last EMI has the lowest interest component and highest principal component.