Equated Monthly Installment (EMI) refers to the fixed amount a borrower pays every month to repay a loan over a specified period. Each EMI includes both principal repayment and interest components, ensuring that the borrower clears the loan in full by the end of the tenure. EMIs are commonly used in loans such as home loans, car loans, education loans, and personal loans.

Formula to Calculate EMI:
EMI = [P ? r ? (1 + r)ⁿ] / [(1 + r)ⁿ ñ 1]
Where:
P = Principal loan amount
r = Monthly interest rate (annual rate ˜ 12 ˜ 100)
n = Loan tenure in months

Example:
If you take a loan of ?10 lakh for 10 years at an interest rate of 8% per annum, your monthly EMI would be approximately ?12,134. Over the tenure, you would repay both the principal and the total interest accumulated.

Key Features of EMI:
- Fixed Payment Schedule: The borrower pays a uniform amount each month, simplifying financial planning.
- Interest and Principal Distribution: In the initial months, a higher portion goes toward interest, while later payments cover more principal.
- Flexible Tenure: Longer tenures reduce the EMI amount but increase total interest; shorter tenures do the opposite.
- Predictable Cash Flow: EMIs help borrowers manage budgets by knowing exact monthly obligations.

Factors Affecting EMI:
- Loan Amount: Higher principal leads to higher EMIs.
- Interest Rate: Even a small change in rate can significantly impact EMI.
- Tenure: Shorter tenure increases EMI but reduces total interest outgo.
- Type of Interest: Fixed-rate EMIs remain constant, while floating-rate EMIs may vary with market conditions.

Importance of EMI in Financial Planning:
Understanding your EMI helps maintain financial discipline and avoid loan defaults. Borrowers can use online EMI calculators to compare loan options, optimize tenure, and plan monthly expenses efficiently.

In conclusion, Equated Monthly Installment (EMI) is a cornerstone of modern lending systems, offering structured repayment and financial predictability to borrowers. Proper EMI management ensures a healthy credit score and smooth debt servicing over time.