What is EMI?
Equated Monthly Installment,i.e.,EMI in short is the amount payable every month to the bank or any other financial institution until the loan amount is fully paid off. It consists of the interest on loan as well as part of the principal amount to be repaid. The sum of principal amount and interest is divided by the tenure, i.e., number of months, in which the loan has to be repaid. This amount has to be repaid monthly. The interest component of the EMI would be larger in the initial months and gradually reduce when compared to the principal amount. The exact percentage allocated towards payment of the principal depends on the interest rate. Though your total monthly principal and interest payment won't change, the proportion will change with time. With each successive payment, you'll pay more toward the principal and less in interest.
Flat Interest Rate ?
Interest charged on the loan without taking into consideration that periodic payments reduce the amount loaned. For example, an individual takes a $10,000 loan at 10% payable in 5 equal installments,. Using a flat interest rate, the interest charge would be $5,000 for the entire term. However, it does not take into consideration that after the first payment, the debt would be reduced by the amount paid, thus effectively reducing the interest expense for the whole period.