Full EMI (Equated Monthly Installment) refers to the standard monthly payment you make on a loan, typically a home loan, covering both the principal amount and the interest accrued.
In essence, it's the normal EMI you pay throughout your loan tenure, unlike pre-EMI interest which you might pay during the construction phase of a property.
Understanding Full EMI Components
A full EMI consists of two primary components:
- Principal: This is the portion of your payment that reduces the outstanding loan amount.
- Interest: This is the lender's charge for providing the loan.
The proportion of principal and interest in each EMI changes over the loan tenure. In the initial years, a larger portion of the EMI goes towards interest repayment, while the principal repayment increases over time.
Full EMI vs. Pre-EMI
It's crucial to distinguish full EMI from pre-EMI. Pre-EMI interest is paid only on the disbursed loan amount during the construction period of an under-construction property. You only pay interest on the borrowed amount, and the principal repayment begins once the construction is complete, and the full EMI starts.
When Does Full EMI Start?
Full EMI payments typically commence in the following scenarios:
- Home Loan for Ready-to-Move-In Property: Immediately after the loan is disbursed.
- Home Loan for Under-Construction Property: After the construction is completed, and you receive possession of the property.
Example
Let's say you take a home loan and your EMI is calculated as ₹30,000 per month. This ₹30,000 is your full EMI, comprising both the principal and interest components.
In conclusion, full EMI represents the regular, comprehensive monthly payment towards your loan, encompassing both principal repayment and interest charges, as opposed to the interest-only payments during a construction period.
