The first word you will hear from the bank when you are taking a home loan or auto loan or personal loan from the bank to purchase your dream home or to purchase your dream car is EMI, which means Equated Monthly Installments.
EMI is the amount payable to the Bank or other lending institution every month, till the home loan /auto loan/ personal loan is paid back in full. It consists of interest on the outstanding home loan /auto loan/ personal loan amount and part of the principal to be repaid.
This is an easy way for individuals to repay the loan in smaller monthly payments, as the huge home loan /auto loan/ personal loan will be split into affordable equal monthly installments.
At the same time its an easy way for banks to hide the huge interest rate component with the help of small EMI !!!