Published on: August 13, 2024
Imagine finding the perfect smartphone: a sleek design with top-notch features and everything you’re looking for. But the only problem? The price is a bit expensive. EMI, now a familiar concept, allows you to divide the cost into manageable monthly payments. For example, instead of paying ₹50,000 in one go, you could pay ₹5,000 per month over a period of ten months. This helps make large purchases more accessible, but typically these payments come with interest charges that add to the overall cost.
Now imagine being offered the same flexibility without the added interest, just the upfront price of the product, divided into easy installments. This is what no-cost EMIs are.
But how do these offers work and are they really free? Here, we have discussed the concept of no-cost EMIs to help you understand what they offer and how they could change the way you approach your next big purchase.
What is No Cost EMI?
An EMI, or Equal Monthly Installment, is a convenient payment option that lets you spread the cost of your purchase over a defined period of time. By making equal monthly payments, you will be able to manage your finances more easily and avoid paying a large sum at once.
Although the interest rate on EMI payments may vary depending on the lender, a no-cost EMI option allows you to pay your EMIs without interest. This option is often available through various banks, credit card providers and retailers. However, it’s important to read the fine print, as some additional costs may be built into the price of the product or involve a nominal processing fee.
How does no-cost EMI work?
Calculating a no-cost EMI is very simple. Simply divide the total price of your purchase by the repayment duration.
For example, you buy a laptop for ₹60,000 and the seller offers a 12-month no-cost EMI option.
With the no-cost EMI, you pay just ₹60,000 divided into 12 equal monthly installments of ₹5,000, with no additional interest.
Benefits of No Cost EMI
A no-cost EMI offers multiple benefits by breaking your purchase into manageable installments, so you don’t have to pay the entire amount upfront. Here are some of its advantages:
- Offers flexibility when shopping: This helps you make multiple purchases without having to pay the entire amount at once. Since your payments are broken down into easy monthly installments, your purchasing budget is reduced.
- Helps maintain a good credit score: By paying your free EMIs on time, you can improve your credit score.
- Convenient access to the loan: No-cost EMI is not only a faster and easier way to get a loan but also provides the convenience of borrowing money to people with low credit scores.
- Interest-free loan: No explicit interest payment is required for the amount borrowed.
- Low processing fees: Processing and documentation fees are generally minimal.
- Widespread availability: No-cost EMIs are offered by several banks, retailers and lenders, ensuring wide accessibility.
What should you consider while opting for no-cost EMIs?
Here are some things to consider when opting for a no-cost EMI:
1. Processing fees:
While no-cost EMI is a great way to avoid paying a large sum up front, it is important to note that some financial institutions may charge a processing fee. These costs are not always clearly indicated in the offer.
2. Risk of debt trap
With the convenience of easy financing, many people are now prone to compulsive spending. You need to recognize the factors that can lead you into the debt trap. A simple rule you can follow is to reconsider your finances if your total EMIs exceed 35% of your income.
3. Reimbursement on time
Making your EMI payments on time is important for maintaining a good credit score. Missing a payment can negatively impact your credit score, which could affect your chances of getting a new loan or other form of credit in the future. Additionally, late payments can result in penalties, increasing your financial burden.
Conclusion
No-cost EMI has changed the concept of paying for large purchases, providing a flexible and accessible financing option. To maximize the benefits of no-cost EMIs, it is important to research the terms thoroughly, manage repayments responsibly, and ensure that the plan aligns with your financial goals.
Another alternative to managing huge expenses is to opt for personal loans. These loans come with higher amounts, competitive interest rates and a flexible repayment term.
Frequently Asked Questions
What are the eligibility criteria for availing the no-cost EMI?
To be eligible for a no-cost EMI, you must have a good credit score and an existing credit card. However, some retailers and financial institutions also offer no-cost EMI options through debit cards or in partnership with non-banking financial companies (NBFCs).
Are there any hidden charges in No-Cost EMI?
Although no interest is charged, some providers may include a processing fee or adjust the initial price by removing discounts. You should always check the final amount to be paid before opting for no-cost EMI.
Do I need a credit card to avail no-cost EMI?
Although no-cost EMI is often linked to credit cards, many platforms now offer this option through debit cards, e-wallets and NBFCs, making it accessible even without a credit card.
What happens if the product is returned or exchanged?
If you return or exchange a product purchased on No-Cost EMI, the retailer will usually cancel the EMI plan and refund any amount paid, although the process may vary depending on the terms and conditions.
What is the difference between No Cost EMI and No Cost EMI?
No-cost EMI and zero-cost EMI are often used interchangeably, both referring to EMIs without additional interest charges. However, always check for hidden fees or conditions.