No Cost EMI Explained: What Is It, Is It Really No Cost, Pros, Cons, and More

The attraction of no-cost EMIs is a big draw for shoppers throughout the online shopping season. This is one of the easiest ways to make purchases without incurring additional interest charges and pay for the merchandise in a staggered fashion with no financial strain. Purchasing expensive items on EMI is a great way to avoid draining wallets in one go. However, it comes at the expense. Considering banks impose hefty interest rates and occasionally a processing fee on these EMIs, many customers avoid purchasing items on EMI. This is why e-commerce businesses miss out on a lot of prospective customers. As a result, they arrived up with a No Cost EMI product, which allows customers to pay the total price of a device over months rather than once. For instance, many customers during the sale choose the no cost EMI mobiles option when seeking to purchase a new smartphone under a defined budget.

The no-cost EMI option appears appealing as it eliminates the need to pay any additional fees. In truth, this EMI choice may not be a genuine no-cost alternative. Let’s look at the strategy and the actual cost of No-cost EMI.

What is a NO-Cost EMI all about?

The way Indians shop has altered due to Equated Monthly Instalments; EMIs are dogmatic. Everything from smartphones to microwaves, washers and dryers, TVs, and even domestic and global vacations is now be purchased on EMI. Assume buying a smartphone for Rs30,000 where the dealer is willing to offer a discount of Rs1,500 on paying Rs28,500 upfront. The bank finances the phone with 12 EMIs of Rs2,500 each. The bank effectively receives the phone for Rs28,500, while the customers spend the bank Rs30,000. As a result, the bank’s spread to fund the telephone is Rs1,500 less than the dealer discount. The bank recoups the deal by charging interest. Typically, sellers grant the bank an upfront discount or rebate equal to the claim.

Is it really No-cost EMI?

The term “no-cost EMI” is disingenuous because one pays the total price for a reduced good or a higher interest rate if the product is not discounted. 

These days, e-commerce companies discount the goods to the precise amount of interest, bringing the amount due to the product’s actual price. It’s dubbed a no-cost EMI since there’s no additional fee on the product price.

Do we really need it?

Many companies, shops, and brick-and-mortar stores offer their consumers interesting EMI and cashback deals. Customers who buy mobiles, computers, autos, and gadgets with no down payment and no-cost EMI save a lot of money on their monthly budget, but they also don’t have to put off their purchases. Customers may take advantage of the no-cost EMI offer because there are no hidden fees or upfront amounts, resulting in more sales for merchants and increased revenue in their accounts. Various merchants and retail establishments pick pos payment devices with the capabilities provided to improve business and perform a smooth operation.

What are the PROS of it?

1. Having the ability to purchase pricey utilities without having to pay upfront
2. Pay over a few months.
3. Flexible tenure choosing option
4. The flexibility to pay the same amount through better planning and budgeting.

What are the CONS of it?

1. Paying EMIs is more expensive than paying in full.
2. For the EMI, a non-refundable processing charge might be charged.
3. GST is spent on the interest owed.
4. In the case of a product return, money is still lost due to interest.

To consider or not to consider No-cost EMI?

It is debatable. If buying items that are likely to be returned, a lump sum payment is preferable. However, if a lump sum purchase for an unnecessary product is out of your budget right now, it’s best to wait till it is.