You walk into a store, eyeing that perfect gadget you have been wanting for months. But the price tag still gives you a bit of pause.
You consider holding off or looking for a discount when you notice a sign, ‘No-Cost EMI @ ₹4,999 per month’.
It grabs your attention, making you wonder if this is the way to make that gadget yours. But what exactly does no-cost EMI mean? Let’s dive in to explore the benefits and how it works.
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Meaning of no-cost EMI
No-cost EMI allows you to purchase products and pay back the cost in equal monthly instalments without any additional interest charges.
Instead of paying upfront, the total product cost is spread across EMIs, making it easier to manage.
However, retailers might adjust product prices or include processing fees to compensate for the waived interest.
This means you pay only the sticker price but split it into monthly payments, which can be appealing for big-ticket items.
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How does no-cost EMI plan work?
When you opt for no-cost EMI plan, there is no interest cost. The total amount you pay matches the retail price. This cost is further divided by the EMI tenure.
For example, if the latest iPhone costs ₹1,44,900 and you opt for a 12-month no-cost EMI, your monthly payment would be ₹12,075 without any added interest.
What are the pros of no-cost EMI?
The following are the benefits of availing no-cost EMI:
Interest-free payments
No-cost EMI allows you to buy expensive products without paying interest, spreading the cost over time. This makes it easier to manage your budget without hefty upfront payments.
Better cash flow
Breaking down payments into instalments helps maintain cash flow. You can afford premium products while keeping more funds available for other expenses.
No-cost EMI can enable you to access high-end items, like the latest smartphone or appliance, without impacting the money in your savings account.
You enjoy quality products sooner, thanks to affordable instalments.
Convenient repayment options
Many No-cost EMI plans offer flexible repayment tenures. You can choose a period that best fits your budget, making it easy to manage payments without financial strain.
What are the cons of no-cost EMI?
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There are a few things that you should be careful about when availing no-cost EMI:
Hidden costs
No-cost EMI might include hidden fees like processing charges. These fees, while not labelled as interest, can add up, making the deal less attractive than it initially appears.
Inflated product prices
Retailers sometimes inflate product prices to cover interest, so you end up paying more than the actual market price. It is crucial to compare costs before opting for no-cost EMI.
Temptation to overspend
The ease of no-cost EMI can encourage impulsive purchases, as it downplays the immediate financial impact. Over time, these purchases could strain your budget and lead to financial stress.
Potential impact on credit score
Missing a payment can affect your credit score. The convenience of this scheme requires disciplined payment habits to avoid penalties and maintain a healthy credit history.
How can you select the best no-cost EMI plan?
Listed below are the factors that will help you pick the best no-cost EMI:
Compare EMI price and cash price
Ensure the EMI price matches the product’s cash price. Retailers may inflate prices for no-cost EMI, so confirm that you are not paying more than the listed price.
Look out for processing fees or other hidden charges. These costs can offset the interest savings, making the plan less beneficial. Always check it with the lender or retailer.
Choose an appropriate tenure
No-cost EMI tenures vary, typically from 3 to 24 months. Select a tenure that aligns with your budget to avoid strain on your finances.
Review prepayment policies
Some plans include penalties for early repayment. If you might pay off the loan early, check for any prepayment fees that could add to your overall cost.
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Final note
There is no doubt that no-cost EMI is an appealing way to spread payments without interest. But it’s essential to weigh all your options.
Low-cost EMI may involve interest but can apply to a broader range of products and repayment plans.
Like, for instance, there is ‘Buy Now Pay Later’ option, which provides short-term relief for smaller purchases.
Then, you could also avail personal loans. They offer flexibility for larger expenses but with higher interest rates.
Each option has its advantages and trade-offs. So, you should consider your budget, repayment preferences and financial goals to choose the most suitable option.
