EMI

What The Hell is EMI?

EMI stands for Equated Monthly Instalment Equated = the amount stays the same every month, but what it is made of keeps changing.

The amount never moves. The split inside it does, and in the early years most of your EMI is going to the bank as interest.

Nobody shows you that split, so people pay for years and quietly wonder why the loan has barely come down.

Real World Example & Calculation:
-> You take a ₹30 lakh home loan for 20 years, say at 8.5% a year.
-> Your EMI works out to about ₹26,000, paid 240 times.
-> In month one, ₹21,250 of that is pure interest. Only ₹4,800 cuts your actual loan Principal = the ₹30 lakh you borrowed.
-> Five years in, you have paid about ₹15.6 lakh.
-> And your loan has come down from ₹30 lakh to ₹26.4 lakh.

₹15.6 lakh left your account. The loan shrank by ₹3.6 lakh.

Over the full 20 years you pay around ₹62.5 lakh for a ₹30 lakh loan.

₹32.5 lakh of that is interest. You buy the house once and pay for it twice.

✍🏻 Mantra Joshi

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