Is No-Cost EMI Free of Cost

No-cost EMI has always been an attractive option for financing when a customer is buying an expensive item that is out of budget. This option allows customers to buy an item in monthly installments without paying any extra interest. But the question always arises: Is No Cost EMI really free? 

We at Rupee112 will help you understand the aspects of No Cost EMI meaning, how No Cost EMI works, and finally, is No Cost EMI worth it? Let’s begin with the basics. 

What is No Cost EMI? 

No-cost EMI is a payment method in which the customers can split the price of a purchase of an item into fixed monthly payments, and the total payment is the same amount at which the article was bought. It is a unique payment method, as the customers can buy expensive articles without making lump-sum payments at once. There are many e-commerce platforms and offline merchants who provide this service in partnership with large banks. 

How Does No Cost EMI Work? 

In the traditional EMIs (equated monthly installments), there is an interest component that is added to the total cost of purchase. It increases the overall amount of purchase. However, in No Cost EMI, there is a waiver of these interest components. This is made possible by the seller providing a discount equal to the amount of interest that would otherwise have been charged. As a consequence, you just pay the original product price, divided into reasonable monthly installments, with no additional interest charges. Basically, it is like taking a loan but with no extra payable interest. This makes no-cost EMI a cost-effective and easy financing option, particularly for large purchases, allowing you to buy now and pay later without paying additional fees. 

There can also be hidden fees and processing charges. Some lenders waive the interest but charge a high processing fee, increasing the overall cost. 

Regulatory Perspective:

In a 2013 circular, the Reserve Bank of India (RBI) addressed the transparency of such schemes and said that there is no such thing as zero percent interest. According to the RBI, interest components are frequently concealed and transferred to consumers in the shape of processing fees or modified product prices. 

When to Consider No-Cost EMI? 

We recommend opting for No Cost EMI in the following situations:

1. Making Big Purchases:

If you are making a big purchase like a refrigerator, AC, laptop, or any other item and don’t want to pay the full amount upfront. 

2. When there is no better offer:

In case there are no better offers such as discounts or cashback, then No Cost EMI will help you to spread the overall cost. 

3. Repayments Ensurity:

You should opt for No Cost EMI only when you are confident that you can pay the monthly EMIs without any issue. If you fail to pay any EMI, it will incur significant charges on your next EMI and will also impact your credit score.

4. Cash Flow Management:

If you feel that paying the sum upfront will disturb your budget and cash flow, then the No Cost EMI is a better option. 

Undoubtedly, no-cost EMI is a great option if you are going for a big purchase and don’t have the entire amount upfront. However, to ensure that there are no extra costs associated, you must check if there are any hidden charges or processing fees.