What is pre-EMI interest?

EMI stands for Equated Monthly Installment for the loan you avail of from your bank. The EMI consists of the principal portion of the loan amount and the interest. The installment amount is fixed on your loan depending upon the loan amount, tenure of the loan, and rate of interest. The higher the interest rate on the loan, or the shorter the loan tenure, the higher will be your EMI and vice-versa.

The loan amount is released by the bank in installments, depending on the stages of completion of the housing project.  During the period of pending final disbursement, you may be required to pay interest only on the portion of the loan disbursed. This interest is called pre-EMI interest. Pre-EMI interest 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. The amount paid over and above the interest by the borrower goes towards Principal repayment and hence repays the loan faster.