Shopping for your favourite gadgets or electronic appliances was never so easy as it is today. Thanks to the No-Cost EMI (Equated Monthly Instalment) option, you do not need to pay a huge amount upfront as you can break the big amount into small EMIs and buy your favourite mobile phone, TV or any other things you need even when funds are not immediately available.

No-cost EMI has emerged as a popular and enticing option for consumers. As the name suggests, these payment plans appear to come without any additional costs, offering a convenient way for individuals to make high-value purchases. However, it’s crucial to understand the mechanics and nuances of No-Cost EMIs to make informed financial decisions.

No-Cost EMIs

A No-Cost EMI allows consumers to spread the cost of a purchase over several months without incurring any interest charges. It’s, however, important to note that while interest is not directly charged, there might be other fees or adjustments involved in the overall cost calculation.

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Hidden Charges

Contrary to the term ‘No-Cost’, these EMIs may involve hidden charges. While interest might be waived, processing fees, down payment requirements, and other administrative charges could apply. Consumers must carefully read the terms and conditions to uncover any potential additional costs.

Applicability on Specific Products

No-Cost EMIs are generally applicable to specific products or through select retailers. Commonly available for consumer electronics, appliances, and high-value items, these EMIs may not be universally applicable across all types of purchases.

Tie-Ups with Financial Institutions

Retailers offering No-Cost EMIs often collaborate with financial institutions to provide this service. The terms of the EMI, including the duration and eligibility criteria, may vary based on the partnership between the retailer and the financing institution.

Impact on Credit Score

Opting for a No-Cost EMI can influence your credit score, although the impact may be minimal. If payments are missed or delayed, it could negatively affect your creditworthiness. Timely payments, on the other hand, can contribute positively to your credit history.

Adhil Shetty, CEO, Bankbazaar.com, says, “Each delayed payment may result in a dent in your credit score, affecting your ability to secure favourable terms on future loans or credit cards. It’s essential to prioritize No-Cost EMI payments, as even a single late payment can have lasting repercussions. Consistent and punctual repayments not only preserve your credit score but also contribute positively to your overall financial standing.”

Down Payments

While the EMI itself might be interest-free, a down payment may still be required. This initial payment reduces the principal amount that needs to be financed, impacting the overall cost of the purchase.

Limited Customisation

No-Cost EMIs might have predefined tenures, limiting the flexibility for consumers to choose the repayment duration. While this can simplify the process, it’s essential to evaluate whether the predetermined tenure aligns with your financial preferences.

Alternative Financing

Before committing to a No-Cost EMI, consider exploring alternative financing options. Traditional loans or credit cards might have lower overall costs, even if they come with nominal interest rates. It’s crucial to compare the total cost of financing across different options.

Discounts and Cashback Offers

Some retailers may offer No-Cost EMIs in conjunction with discounts or cashback offers. However, it’s crucial to understand the interplay between these incentives and the terms of the EMI, as certain discounts may be contingent on specific payment methods.

Prepayment Charges

No-Cost EMIs might have restrictions or charges associated with prepayments. If you plan to pay off the entire amount before the agreed-upon tenure, be aware of any penalties or adjustments that may apply.

While No-Cost EMIs provide a convenient and seemingly cost-effective way, it’s imperative to approach them with a discerning eye. Understanding the fine print and evaluating the overall cost is also crucial for a hassle-free experience.