Everything You Need To Know About No-Cost EMI

Many of you must have heard about “No-Cost EMI” during the Amazon and Flipkart sales. They spend a huge amount on advertising no-cost EMI. What is No-Cost EMI? How does it work? And many more questions are answered in this blog.

You might be thinking that in No-Cost EMI you don’t have to pay interest on the loan. Let me tell you there is no such thing called as an interest-free loan. Just by reading “NO-COST EMI”, we get attracted to the offer given by the retailer. It is just an offer by which you pay your EMI provider only the product price, equally divided over your repayment timeline. For instance, if you purchase a product for Rs. 48,000 items at a 6-month tenure, you will pay your EMI provider Rs. 3,000 every month for 6 months, which equals Rs. 18,000.

So, how does it work? When discount equals interest. This is very common with many retailers who offer no-cost EMI. In this scheme the interest and discount are equal. For example, in this image, you can see that an electronic device is selling at Rs. 97,900 and once you select the no-cost EMI option it shows interest and discount which are equal the interest is not born by the customer. If you choose to buy the electronic device with a no-cost EMI scheme, you have to pay the full price of Rs. 97,900, which is divided into EMIs. Part of this amount is paid to the retailer and the interest amount is paid to the financier.

Source: Amazon.in

The second scheme is the interest amount is added to the cost of the product. Let’s continue with the same example but here there is no discount given to the customer and in addition, the buyer has to pay the interest. In the image above that electronic device is costing Rs. 97,900 when selected no-cost EMI. But when you deselect no-cost EMI the interest gets added to the cost. So, now that same electronic device would cost 97,900+6246 = Rs. 1,04,0146 (I have considered 3 months of EMI). The amount may vary depending upon the interest rates given by the financier.

Benefits of No-Cost EMI. This scheme is best during the festive season sale when we need to buy in bulk while staying intact with our budget. No interest charges, additional costs or down payment is required. Apart from the benefits studies shows that almost one out of every two Indians is taking a loan to improve their lifestyle.

One major thing from a decision point of view is to decide when is the right time to use the no-cost EMI option or when to use it. One good reason while choosing this option is when you get a great deal, or you want to buy an expensive item and you can’t afford to pay the full amount.

I hope I was able to explain No-Cost EMI effectively and thoroughly.

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Writer - Mayank Choudhary