The fact behind no-cost EMIs

NEW DELHI: There’s nothing as satisfying as having your cake and consuming it too. No-cost EMIs (equated month-to-month instalments) come closest to the expertise for patrons seeking to make an costly buy.

No-cost EMIs present the shoppers with the double benefit of shopping for a product on instalments as an alternative of constructing your entire cost up-front with out paying any extra curiosity for making the cost in instalments.

However, in contrast to the identify suggests, there isn’t a waiving off of the curiosity in case of a no-cost EMI. “A no-cost EMI is subsidised or discounted either by the manufacturer or the merchant,” mentioned Adhil Shetty, CEO, Bankbazaar.com.

The service provider or the producer bears the rate of interest, which is a further low cost for the client.

Suppose you need to purchase an airconditioner costing Rs42,000. The service provider affords you two choice. Either you pay the cash upfront or take a one-year mortgage the place the EMI shall be Rs3,500.

Assume the rate of interest for such a mortgage is eighteen%. In this case, the client must pay ₹4,207 as curiosity on a one-year mortgage. Instead of the client paying the curiosity value, both the shop or the producer bears it. Either of the 2 can pay the curiosity cash to the lender.

A no-cost EMI is all the time tempting. However, there are a number of elements you want to remember earlier than you go for it. There could possibly be restrictions.

“Not all products would be available with a particular merchant or be covered under this scheme. The manufacturer or the store may decide to push a specific model under the plan. There is a possibility that if the consumer doesn’t opt for no-cost EMI, the store or the manufacturer may offer discounts or cashback, and they may not be available if the buyer purchases the goods on loan. In some cases, you may have to pay a processing fee, which is an additional cost,” mentioned Shetty.

Like another mortgage, the borrower must repay the no-cost EMI on time. If that doesn’t occur, it will possibly have an effect on your credit score rating and affect your creditworthiness. So, except you might be certain about your capacity to repay your mortgage, don’t decide to purchase merchandise on no-cost EMIs.

(Do you’ve private finance queries? Send them to mintmoney@livemint.com and get them answered by trade consultants.)

Subscribe to Mint Newsletters * Enter a sound e-mail * Thank you for subscribing to our e-newsletter.

Never miss a narrative! Stay linked and knowledgeable with Mint.
Download
our App Now!!