No-cost EMI is popular among customers for purchasing expensive products by paying the price in instalments. You can buy refrigerators, TVs, washing machines, mobile phones, and other goods online without paying the huge cost at one go. These schemes offer good value for money, yet it is good to know about the offers to make the most of them. Here are some important things you must know.
How does a no-cost EMI loan work?
No-cost EMIs come in multiple options for consumers. One of the options is that the product is sold at a discount without the EMI option. However, if you avail the no-cost EMI, the available discount is taken away, and you purchase the product at the actual price. For example, let the online price of a product be Rs 4,500 after a discount of 10%. If you want to purchase it at no-cost EMI, then you pay an EMI on the actual price of the product, i.e., Rs 5,000. So, you must forego the discount available on the product.
In the second option, if the price of the product is Rs 5000, the interest applicable on the EMI (say, Rs 1000 @ 20% for a 12-month tenor) for the entire tenure is added to the price of the product. So, in this case, you will pay Rs 6000 in 12 EMIs of Rs 500 each.
In one of the options, the lender shows zero interest levied on the borrowed amount; instead, they cover the entire interest by charging upfront processing fees.
When should you opt for a no-cost EMI loan?
No-cost EMI loans can be useful in case you are buying an expensive product, and you don’t wish or can’t to pay the entire amount at one go. Also, sometimes merchants offer discounts or cashbacks on credit cards when you buy a product online through the no-cost EMI option.
Adhil Shetty, CEO, Bankbazaar.com, says, “No-cost EMIs help you use your credit card to buy electronics and other items without having to take a new loan. The EMIs attract no interest and allow consumers to fulfil their aspirations of owning prized electronic items. Consumers on BankBazaar’s co-branded credit cards, for instance, look to buy mobile phones, fridges, TVs, etc., and dozens of offers are created for them every month to help them buy these items with no-cost EMIs.”
Does it impact your credit score?
Yes, not paying a no-cost EMI loan can have a negative impact on your credit score. It is essential to check your repayment capacity before you opt for multiple no-cost EMI schemes to avoid delays or defaults in repayments.
No-cost vs regular EMI
In a no-cost EMI, the interest component is either added to the product price, charged as a processing fee or adjusted with the discount available on the non-EMI product. On the other hand, in a regular EMI loan, the interest component is separately reflected under each EMI instalment.
Understand the additional charges applicable whenever you choose any no-cost EMI offers. These costs may include prepayment penalties, late payment charges, etc. Check all such charges before availing the EMI facility.
No-cost EMI offers may be good for consumers who choose the product carefully and go through the terms and conditions of the schemes offered before making a big purchase.
THE FINE PRINT
* No-cost EMI loans can be useful in case you are buying an expensive product, and you don’t wish to or can’t pay the entire amount at one go
* You can go for it if the credit card issuer is offering any additional discount/ cashback on buying the product through the no-cost EMI option