EMI (Equated Monthly Installment) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs are used to pay off both interest and principal each month, so that over a specified number of years, the loan is paid off in full.
The EMI calculation uses the reducing balance method, where the interest is calculated on the outstanding principal amount. As you pay each EMI, your principal reduces, and consequently, the interest component in your EMI also reduces over time.