What is EMI in Advance and EMI in Arrears?

As a banker, I can tell you the difference between EMI in advance and EMI in arrears. Two popular EMI payment options are EMI in arrears and EMI in advance. The time of the payment is the primary difference between the two.

• EMI in advance refers to EMI payment plans in which the lender receives the first installment of EMI payments upfront at the time of loan disbursal.

• EMI in arrears, on the other hand, denotes that the borrower uses the loan amount for that month and pays the installment at the end or a fixed date of the month.

Pallavi Kumari has already shared the difference between EMI in advance and arrears. Let me make it understandable with an example.

EMI in Advance vs EMI in Arrears

Here is an illustration of an advanced EMI and arrears EMI for a car loan to help you understand better. 

Suppose you want to buy a car for Rs. 4.5 lakh in total. You apply for a car loan of Rs. 3 lakh, with a processing charge of Rs. 3,000, and an interest rate of 12% per annum for a duration of 3 years (36 months).

Here, with Advance EMI, the down payment is Rs. 9,866 more and the car's overall cost with arrear EMI is Rs. 3,528 more.

I hope the above example helps you understand better the EMI in arrear and EMI in advance meaning.

Hey Pal,

Lenders compete with one another by providing quick loan approval and disbursement, flexible loan payback alternatives, and little to no paperwork. Banks provide a variety of loan repayment choices in order to meet the various needs of their customers. There are two different EMI payment options that a borrower can select from, and this is where the argument between EMI in advance vs EMI in arrears arises.

EMI in arrears is often referred to as EMI in arrears or EMI standard. In this case, the borrower must repay the loan by making EMI payments at the end of each month for the designated loan term. In this instance, the lender does not take anything for an advance EMI payment and transfers the entire principal loan amount to the borrower's bank account after deducting the processing charge. If you don't have enough money to put a down payment on the car of your choice, the arrear EMI plan is appropriate.

Many banks in the nation provide the option of making EMI payments in advance, sometimes referred to as Advance EMI. The first EMI payment is made in advance to the bank in this case, and the processing charge is deducted from the principal before the first EMI payment is transferred to the borrower's bank account. In this scenario, just the principal amount will be included in the first EMI payment that is submitted in advance. For the remaining EMI instalments, the principal loan balance is decreased in this manner.

Difference between EMI in advance and EMI in arrears:

I would like to conclude my argument between EMI in advance vs EMI in arrears arises. I hope this helps:)

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