Pre-EMI is a term commonly used in the context of home loans or other types of long-term loans, particularly in India.
It is payable every month from the date of each disbursement up to the date of commencement of EMI.
However, many banks offer a special facility whereby customers can choose the installments they wish to pay for under construction properties till the time the property is ready for possession.
Anything paid over and above the interest by the customer goes towards principal repayment.
The customer benefits by starting EMI payment earlier and hence, repays the loan faster.
The pre-EMI payments are typically lower than the regular EMI payments, which include both the interest and principal components of the loan.
Once the full loan amount is disbursed, the regular EMI payments begin, which include both the principal and interest components.
Some banks also offer their customers flexible repayment options. Here, the EMIs are unequal.
Pre-EMI interest is payable every month from the date of each disbursement up to the date of commencement of EMI.