What is Down Payment in EMI? Your Ultimate Guide to Handling EMIs Like a Pro

A few days before, I lost my car due to some personal reasons, and I am a guy who is always in dire need of a car to travel and to work as well. I don’t have enough money to get a new car in no time, and this problem was so stressful for me, as my work and traveling were both affected by this loss. I just wanted to fulfill my need; it was my wish for someone to lend me his car and take payment later. 

And then a friend of mine told me about EMIs (Equated Monthly Installment). I came to know that what I was wishing for is so much easier to get; there are several institutes that are ready to lend me a car and take late payment. So, I got the car which I wanted in no time, and now I am paying for it in installments each month, which are much easier to pay as per my income.

What is Down Payment in EMI?

You may wonder in the above chart there is mentions about down payment. and what it is. Actually, a down payment is the first large installment that helps the person reduce the total loan amount for the upcoming months. Such as my car cost ₹5 Lakh, and I paid ₹75,000 as a down payment. And now I just have to pay installments with interest for ₹425,000. And that’s the general concept about EMIs.

EMI under which Head in Tally

In finance language the payments are covered or recorded under specific criteria (Liability or Asset) in ledger head depending on their nature.  For EMIs, payments are recorded in Tally as follows:

Factors Influencing EMI Amount

There are several components that may affect the value of EMI, but the most important ones are  its 3 major components that affect the EMI amount effectively:

1. Principal (P): First and foremost, component is the principal amount is undoubtedly. The higher the principal amount, the higher the EMI on your loan, and vice versa.
2. Rate of Interest (I): The higher the rate of interest, the higher the EMI. But it can vary depending on the tenure and policies of the vendor. 
3. Tenure: As you know, the EMI amount is the actual amount plus the interest amount divided into the decided portion. The greater the number of portions lower the value, or you can say the longer the tenure, the lower the EM, but the total interest paid will be greater in this case.
4. Other Factors: Other main factors may involve:

• Down Payment: It is the amount you initially pay to lower the total loan amount. Hence, the higher the down payment, is lower the EMI.
• Credit Score: Credit score is actually the frequency of your repayment, reflecting your commitment towards vendors. A bad credit score may result ina  higher interest rate

EMI Amortization Schedule

This shows how your EMIs will be paid each month and how the amount is reduced over time. This table helps to make financial decisions and helps you with the upcoming installment.

Foe Example: Your 24-Month EMI Schedule (₹4,25,000 @ 10%, EMI ₹19,990)

How to Pay EMI Through Credit Card?

It is very simple and easier to use a Credit Card for EMIs

Steps:

1. Go to your preferred online store, navigate to your desired product, and shop for it.
2. At checkout, select Credit Card EMI
3. Choose bank 
4. Select tenure, i.e., 12,24, or 36 months
5. Enter card details and the relevant number  
6. Enter the OTP you received on your number
7. Proceed for payment and pay your first EMI.

Several banks, such as HDFC, Axis, ICICI, SBI, and Kotak, support credit card EMI.

Note that the interest rate may differ for different banks.

What is Cardless EMI?

Only credit card holders cannot avail EMIs, it is not a problem if you don’t have one, as you can also avail EMI via Aadhar Card, PAN+Bank OTP, which is known as Cardless EMI.

Providers:

• Bajaj Finserv Insta EMI Card
• ZestMoney
• LazyPay
• FlexiLoans

How I Could’ve Used It: Just an example, I wanted a car but had no credit card, so I applied via the Bajaj Finserv App, got a ₹4L limit in 5 mins, and bought a car on EMI.

How to Pay ICICI Loan EMI?

ICICI offers various options to pay the Loan EMI, such as:

How to reduce EMI of Existing Personal Loan?

There are several ways by whichh you can reduce the EMI of an existing personal loan:

• Increase the tenure to reduce the amount of EMI, but it will result in more total interest paid.
• You can choose the bank that offers EMIs at lower interest rates.
• Make a down payment to reduce the principal.
• You can also negotiate with the bank if you have a good repayment history.

How to Pay Extra EMI for Home Loan?

While financing a home, you can make a prepayment that can save lakhs in interest in lakhs, that how you can make it

Steps:

1. Check the prepayment clause, which is usually a 0–2% charge
2. Pay via net banking and Select “Prepayment”
3. Choose:
   • Reduce EMI (same tenure)
   • Reduce Tenure (same EMI), which will save more

These are a few tips by which you can manage your EMIs in a good manner. And remember that making EMIs a blessing for you, not a burden. Use it wisely, not foolishly.

FAQs: General EMI Concept

Conclusion

I was able to purchase a 5 lakh car (₹75,000 down, ₹19,990 per month) after losing my car due to EMI. It is a combination of principal and interest that is computed in terms of P, rate, and tenure. Key factors: an increase in principal/interest/tenure does not produce the same effect, and a down payment decreases the loan. Keep EMI less than a third of the salary, pay on time, and no multiple loans. Planning is made easy by tools such as EMIcalculator.ai. Consume not because you want to.