Summary of this article
Interest free EMIs may have interest included in the cost of the product or with processing fees.
Missing payments can affect your credit score even when using no-cost EMIs.
Look over total costs and fine print for other fees before leaping at EMI deals.
Paying for that luxury smartphone or refrigerator may not necessarily empty your wallet all at once. No-cost EMI schemes allow you to stagger repayments while paying no interest (apparently). These offers come aplenty on expensive items, ranging from electronics to furniture, sold by both online and offline retailers. While availing these offers may look like a walk in the park, there can be catches if you miss out on the small print associated with the pricing of these products. Marked-up pricing, processing fees or discounts foregone may alter the actual cost.
Read on to find out how these schemes work and if they really work for you.
How Does No-Cost EMI Loan Work?
Buyers have several no-cost EMI options from which they can choose. Firstly, when you don’t opt for the EMI option, a discount is offered on the product but if you choose to avail the no-cost EMI plan, the discount offered earlier gets void and you buy the product at the product’s original price.
Suppose the online price of a product is Rs 4500 after discounting 10 per cent. If you intend to purchase the product under the zero cost EMI plan, you will pay EMIs on the product’s actual price of Rs 5000. Therefore, the discount available on the product is foregone.
Under the second option, if the product costs Rs 5000, interest applicable on EMI (for example, Rs 1000@20 per cent for 12 months) for the entire tenure is added to the product’s price. Therefore, you end up paying Rs 6000 in 12 equated monthly instalments of Rs 500.
Under another option, the lender charges you no interest on the amount borrowed but absorbs the entire interest by levying a processing fee upfront.
When Should You Take A No-Cost EMI Loan?
You can consider taking a no-cost EMI loan while buying that big-ticket item which you wish to pay for over a period of time rather than making a one-time payment. Moreover, sometimes if you purchase a product online via no-cost EMI option, you can get discounts on your credit card as offered by merchants.
The best part about buying electronics through no-cost EMI is that you don’t have to take a loan to own your dream gadget. Using no-cost EMIs, you can buy smartphones, laptops, TVs and many more things through your credit card.
Will It Affect Your Credit Score?
Defaulting on a no-cost EMI payment can affect your credit score. Make sure you evaluate your repayment ability before opting for multiple no-cost EMI deals.
No Cost Vs Regular EMI
In case of a no-cost EMI loan, the interest amount is either added to the product’s price or is collected as a processing fee or is adjusted with the discount offered on the non-EMI product. As the name suggests, in case of a regular EMI loan, the interest amount is reflected separately under each instalment.
Additional Charges
There can be additional charges that come into play when you opt for any of the no-cost EMI plans. These charges could be pre-payment penalties, late payment fees, etc. Make sure you know all such charges that the lender might levy before you decide to choose the EMI option.
For smart shoppers who research the product well before buying it and understand the fine-print that comes with various schemes offered by lenders, no-cost EMI offers may sometimes prove to be beneficial.
