Talk:Equated monthly installment

EMI also works like this

Bank lends in terms of Fixed Deposits and offers to receive repayments in terms of Recurring Deposits. Bank offers to accept Monthly interest on loan (FD), and offers to pay interest on the RD installment, which is amount in excess of FD (monthly) interest. When the RD value with interest becomes equal to FD value, (loan amount) , Bank appropriate the RD value to FD and clears the loan. Example : Loan Amount 10,00,000 interest 8%, period 120 months. Bank offers 10,00,000 as FD with monthly interest, monthly interest is, 6,666.67. Bank offers to accept, monthly 12,132.76, of which 6666.67, is the FD interest and 10,466.09 is RD installment for 120 months. At the end of 120 months RD matures for FD amount enabling the Bank for appropriation towards FD (loan amount), thereby clearing off the loan at the end of 120 months.

This is a subtopic of interest

I suggest this be merged with the article on interest RezviMasood (talk) 12:40, 3 January 2018 (UTC) RezviMasood (talk) 12:40, 3 January 2018 (UTC)

Wouldn't this be more appropriate to merge into installment loan (though the "installment loan" article fails to point out that installments are generally equal … and that article has certain peculiarities)? I notice that wiktionary has a reference to "equal monthly installments" (under "EMI") but no actual entry. I'd also think it is worth having a "usage note" to the effect that the acronym "EMI" is most commonly used to describe such loans in specific countries (e.g. India) … and in those instances where such terms are described in the U.S., this would be spelled out and the spelled-out wording would be "equal monthly installments".

Are there any specific implications or assumptions of an EMI loan in India, such as how a payment in excess of the scheduled amount is handled (e.g. is it even allowed and does the excess payment reduce the balance on which interest is charged)? Fabrickator (talk) 07:08, 28 May 2020 (UTC)

This sentence: "The concept of instant gratification for a small down payment became popular after the end of the World War I and is believed to be one of the causes of the Great Depression." seems so off-the-wall to me that I think it might be spam or vandalism. Kontribuanto (talk) 20:33, 22 June 2018 (UTC)

Concur, that's an odd, unsourced generalization and out-of-place. Kuru (talk) 20:52, 22 June 2018 (UTC)

Article Introduction

Does the article need to be introduced as “... is defined by Investopedia as ...”? Why not just introduce the article starting with the definition, and include the Investopedia article as a reference?

2001:8F8:1333:856D:8F1:A9F1:2D7D:39C4 (talk) 09:24, 20 August 2020 (UTC)

What differentiates EMI from a standard installment loan?

A typical installment loan allows you to purchase something by borrowing a certain amount of money and then paying it off in periodic payments over a fixed amount of time. Each payment consists of accrued interest (during the last month) plus some amount towards principal, normally calculated so that the same amount is due each month (i.e. equal monthly installments). At least in the U.S., you are normally allowed to make additional payments towards principal, thus saving on interest and completing the full payment sooner (essentially you earn interest on your additional principal at the stated interest rate for the remainder of the loan).

So the term "installment loan", in the U.S., generally implies this. OTOH, I think India has a couple of different ways of calculating interest on an EMI loan, at least one of these would likely be considered deceptive in the U.S.

I would say that EMI definitely describes these typical terms as applied in the U.S., but the article should clarify the difference between how things work in India vs the U.S. (or obviously, other parts of the world that have distinctive interpretations of the loan terms). Fabrickator (talk) 18:38, 13 October 2022 (UTC)

misleading claim of EMI advantage

Per the article:

The benefit of an EMI for borrowers is that they know precisely how much money they will need to pay toward their loan each month, making the personal budgeting process easier.

Under standard consumer mortgages (e.g. in the U.S.), there is a scheduled payment, but this is only a minimum payment. By making a payment in excess of the scheduled amount, which is to be applied to principal, future interest charges are reduced to reflect the lower outstanding balance, thus reducing the interest applied for the remainder of the loan (without reducing future payments), with the result being that the loan is paid off sooner and potentially saving much interest over the duration of the loan.

For credit cards, the scheduled payment amount is typically a small percentage, but consumers should attempt to pay off such loans as quickly as possible in order to minimize interest charges. Paying only the minimum amount (while continuing to make additional purchases) is the biggest mistake consumers make, and is simply not sustainable.

The idea of "equated monthly installments" as demonstrating a way by which a purchase may be paid off in "low easy payments" is not inherently bad, but if it prohibits the consumer from paying it off faster, it becomes similar to making only minimum payments to pay off a revolving balance. This should not be considered a beneficial feature, but rather, the prohibition on paying it off sooner (that presumably would reduce the interest charges) is a major disadvantage as compared to other types of loans.

IMO, this is a misleading representation of the actual disadvantages of an EMI loan. Fabrickator (talk) 07:10, 1 March 2024 (UTC)