EMI or Equated Monthly Installment is a term that the Indian middle-class is now well-aware of. Or shall I say habituated? While paying off loans still sounds like a huge liability, yet EMI has made it possible to achieve our life goals more faster and comparatively easily.
In this article, let’s have a look at how interest rates affect the EMI.
HOW DOES INTEREST RATES AFFECT THE EMIs
Interest rates change from lender to lender. It also depends on the credit score of the borrower, repayment capacity, income of the borrower and the market conditions. This varied interest rates bring changes to the EMI amounts too. The varied types of interests are –
- Reducing Rate : Here the rate of interest is calculated on the outstanding amount. So it gets reduced as the principal amount gets paid.
- Floating Rates : Here the rate of interest depends on the market dynamics, that is why, it is referred to as floating rates. The economic conditions influence the rate of interest, the tenure and so the EMI amount. The floating rate remains stable and is fine when the base rate remains unaffected by RBI. But when the base rate varies, the floating rate gets unpredictable.
- Fixed Interest Rates : In this case, at the time of borrowing the principal amount, the rate of interest and the tenure is fixed. It is usually 1 or 2% higher than the floating rate. Still it is better to opt for fixed rates than floating rates due to their unpredictability.
- Progressive EMIs : On long term loans, usually some lenders allow progressive EMIs. This means initially you pay a certain amount as EMI. This can increase progressively with an increase in the salary. This allows you to pay off your loan faster.
- No Cost EMIs : As per RBI guidelines, there are no rules for zero cost or no cost EMI. So the ‘no cost’ claim is just an eye wash to attract the public to indulge in EMI options. You may come across this no cost EMI option on various credit or debit cards. In actuality, the rate of interest of these EMIs could be much higher than the others. May the discounts are included in or the processing fees are higher here.
TENURE OF EMIs
Tenure i.e. the time period for any EMI plays one of the deciding factors for the EMI. When the tenure of your EMI is longer, then initially you have to pay a higher interest rate and the principal amount is lower. It reverses as time passes and you go on paying your EMI towards completion. Then the principal amount increases whereas the interest rate decreases. That is why it is always advised to opt for closure on the initial stage when the rate of interest is higher. You might be wondering how the time period is fixed?? Well it depends on age, credit history and scope of income. If you are young, you get more chances to get loans with longer tenure. But if you are aged, then it is advised to opt for shorter tenure.
HOW TO PAY LOAN EMI USING ONEAPP
Paying your monthly EMI and on time is one such thing in life which you can take care of by using digital medium and yes you can Best Online EMI Payment App. But how? Keep reading:
- Once you have downloaded oneapp (You can download it now from here), you need to register using your mobile number.
- Upon registration you will reach the dashboard of the app where you can find many cards for different actions.
- Scroll to onepay, enter by clicking the ‘Pay Bill’ button.
- You reach another window with several popular services that can be paid online using oneapp.
- Search and click EMI payments.
- It will list down several of the loan providers. Search your loan provider’s name and click.
- Enter your loan account number. It will fetch all your loan data, EMI amount and due date.
- Now click the pay button and pay using your preferred digital payment option.