That is now known as Equated Monthly Installment. Nowadays, even if you buy products on EMI, many products are available as a special offer of no cost EMI, which means that you have to pay back the original cost of the product without any interest. But here you can see if it really earns no interest or any other hidden charges are being charged from you without your knowledge.
How are products sold on No Cost EMI?
Products are sold on No Cost EMI to consumers in a variety of options.
But, the following example shows how such monthly installments are actually covered by indirect payments.
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You want to buy a washing machine. Various discounts are offered along with no-cost emi on your chosen product. Its original price was Rs. 20,000 and if you buy in cash on cash-on-delivery or pay the full amount via online payment, get a 10% discount of Rs. 18,000/- is mentioned.
If you choose the no-cost emi option, the discount on the product will be cancelled. You will be given emi only on the original price of the washing machine. So, the price of the item you are buying is a total of Rs. 20,000/- you will pay. So, you should forget about discounts.
In the next example, the interest rate for no-cost EMI is given. Out of which, the price of the item you buy is Rs. 5,000 but if you opt for the no-cost EMI, you will get 20% interest for 12 months at Rs. 1000 will be mentioned to be paid. So, in this option you can get Rs. 500 per cent, making a total of Rs. 6000 you will pay.
In another option, the amount of the item is spread over the same 12 months and you have to pay an additional amount. But when you buy the product under no-cost option, instead of paying interest separately, you will be charged an additional amount as processing fee separately.
When should you opt for No-cost EMI?
When buying a very expensive item, you can choose this option if you don’t have the money to pay the lump sum, or the amount you can pay upfront.
Also, if no-cost EMI is available through your credit and debit card, you can avail it without taking a fresh loan.
Even if you buy the goods on no-cost EMI, you will have to pay regular monthly installments just like paying a bank loan.
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