EMI vs Bullet Repayment: Which Should You Pick?
By SonaFin Editorial Team · · 7 min read
In short: EMI repayment spreads principal and interest across monthly instalments. Bullet repayment pays everything at the end. EMI usually costs less in total interest; bullet keeps monthly cash flow free.
How each repayment option works
With EMI, you pay a fixed amount every month that covers both interest and part of the principal, so the balance falls steadily. With monthly interest payments, you pay only interest each month and repay the principal at the end. With bullet repayment, you pay principal and accumulated interest in one payment at maturity.
Which one costs less
Interest is charged on the outstanding balance. EMI reduces that balance every month, so total interest is generally lower than in plans where the full principal stays outstanding until the end. Bullet repayment can look cheaper month to month, but the interest accumulates on the whole principal for the entire tenure.
How to choose
Choose EMI if you have steady monthly income and want the lowest total cost. Choose monthly interest or bullet if your income is seasonal or lumpy and you expect a lump sum, such as crop proceeds or a bonus. Whatever you pick, confirm the part-payment and foreclosure terms, and use a calculator to see the total repayment before you commit.
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