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thefreak · 29th October 2007, 12:08

You indeed are missing something.

The interest paid is on the principal amount outstanding of the loan. In fact the first EMI would have the highest amount of interest because the amount of principal outstanding is the highest.

The loan repayment does not start after one month. That would be the case if you have taken a post EMI scheme.

In layman's terms:

There are two types of EMI's that can be taken. The first one (the one that you have taken) takes the EMI payments at the begining of the month. The second one (which you refer to when you say that the first EMI should be after one month of purchase) is one in which you make the payments at the end of the month. Almost universally the first EMI system is followed. You pay the interest on the principal outstanding and a part of the principal. That is why the first month would have the highest interest component and this gradually decrease to a few hundred bucks in the last payment.

29th October 2007, 12:08	#2 (permalink)
thefreak BHPian Join Date: Aug 2007 Location: New Delhi Posts: 328	You indeed are missing something. The interest paid is on the principal amount outstanding of the loan. In fact the first EMI would have the highest amount of interest because the amount of principal outstanding is the highest. The loan repayment does not start after one month. That would be the case if you have taken a post EMI scheme. In layman's terms: There are two types of EMI's that can be taken. The first one (the one that you have taken) takes the EMI payments at the begining of the month. The second one (which you refer to when you say that the first EMI should be after one month of purchase) is one in which you make the payments at the end of the month. Almost universally the first EMI system is followed. You pay the interest on the principal outstanding and a part of the principal. That is why the first month would have the highest interest component and this gradually decrease to a few hundred bucks in the last payment. __________________ D-uh....... 'If you tried to give rock and roll another name, you might call it 'Chuck Berry' - John Lennon Last edited by thefreak : 29th October 2007 at 12:12.