The Good and Bad of EMI

The new iPhone is reaching out to you with its brand new features, yet your bank balance refuses to budge into your demands. Sounds familiar? We all want that extra, just a bit more, more than what we can afford.

Social media, peer pressure, and just being here in this highly consumer-centric world, forces us to make choices that would let us live the “ good life.”

One magic solution of the 21st century to afford anything with the down-payment of a meager few dollars is the option of equated monthly installment or popularly known as EMI. It allows a borrower to pay the lender a certain amount of money at a specified time of each month until the loan is cleared.


EMI is of two main types:

  1. Flat-Rate EMI– Here, the amount of the principal loan remains fixed for the whole tenure of the EMI to be paid.
  2. Reducing-Balance EMI– In this type of EMI, the principal sum gets reduced every month post-payment. This makes it a better option for borrowers.

As in every scheme, EMI also comes with its own set of pros and cons. Some of them are listed in the following sections.

Benefits of EMI

  • It gives you “buyer’s freedom,” irrespective of your paycheck. 
  • Consumerism has increased with a boom due to this middle class-friendly option.
  • With broad coverage of EMI schemes in sectors like luxury goods, real estate, car insurance, healthcare, and others, the way towards better living is a reality for many.
  • Businesses that allow such schemes to flourish while providing the customer ease of payment.
  • With the option of Reducing-Balance EMI, borrowers can have reduced loan amounts for every month.
  • The fixed date payment, combined with options of the amount to be repaid every month, makes it even more convenient for borrowers.

The Drawbacks of EMI

  • It makes way for impulsive buying.
  • May lead to a situation of debts.
  • The apparent lack of bulk payment brings a false sense of affordability.
  • It indulges in the habit-buying of redundant products.
  • May incur considerable mismanagement of your finances.
  • You may face a challenge of income vs. expenditure, where one is imbalanced against the other.

Final Words

EMI has helped welcome the consumer base that mainly comprises middle-class buyers. For such buyers, goods, and items beyond necessity, has suddenly become affordable.

Moreover, with EMI options expanding well beyond common goods into healthcare, retail, gadgets, real estate, and even holiday packages, this middle-class market base has seen a tremendous boost.

However, you should exercise caution while availing EMI options. The biggest reason for this is the deceptive yet alarming increase in expenditure it causes. More often than not, it can lead to rising debts and penalties, thus starting the never-ending cycle of further loans.

Whether you choose to opt for an EMI or not, a solid understanding of your finances will definitely give you a better footing and save you the burden of unnecessary debts in the long run!