With E-commerce sites serving up irresistible discounts around the clock ,shopping has transformed from a festive frenzy to a year-long spree. Our buying habits have become more impulsive thanks to the relentless notifications luring us into snagging “the best deal ever”.While it feels like we’re saving big bucks, we often end up with items we never needed in the first place.
Enter the No-cost EMI scheme, a rising star in the white goods sector. It’s become a common story:someone buying a mobile phone, a tv, or a fancy appliance they once thought was out of reach, all thanks to zero-cost EMIs. But is it really a stellar dealer just a clever trick? Let’s dive in and find out!
What is No Cost-EMI ?
No-cost EMI ( Equated Monthly instalment) is a financing option that allows you to purchase a product or service and pay for it in monthly instalments without any additional interest or fees.Essentially, you’re only paying the total price of the product, spilt into equally monthly payments. With a regular EMI plan, you agree to pay for a product in equal instalments over a set number of months. Most EMI options come with a high-interest rate, meaning you end up paying more for the product in the long run. A No-Cost EMI,on the other hand, doesn’t charge an interest fee.
The “No Cost EMI” scheme is rapidly gaining popularity as a way for shoppers to purchase expensive items that might otherwise be out of their price range.Flipkart pioneered this financing scheme, and other e-commerce sites quickly followed suit.This scheme allows buyers to purchase high-value items online via EMIs, reducing the burden of paying a large sum upfront.
Purchasing expensive goods and services through a No-Cost EMI plan is convenient, allowing individuals to buy products without paying the full amount at once. Even if you have a low credit score, you can use a No-Cost EMI credit to make purchases.
Regular Vs No Cost EMI?
| No-Cost EMI | Regular EMI |
| Interest rate: No Interest charged, only the product’s price is split. | Interest Rate : Interest is charged on the principal amount. |
| Product Cost :Sometimes slightly inflated to cover interest costs. | Product Cost :The actual cost of the product is split. |
| Processing Fees :Often charged but may vary by lender | Processing Fees :Processing fees can be high and are common |
| Repayment Amount :Equal instalments without extra cost | Repayment Amount :Equal instalments including extra cost |
| Transparency :Cost might be embedded in product price | Transparency : All charges are usually clearly itemised |
| Availability :Limited to specific products and retailers | Availability :Available for a wide range of products |
| Promotions :Often comes with additional offers or cash back. | Promotions :Rarely includes additional promotions. |
The Key difference lies in how the interest cost is managed, whether it’s embedded in the product price for No-Cost EMI or added as an interest rate in regular EMI.
Is No-Cost EMI allowed in India ?
The Reserve Bank of India (RBI) in its circular in 2013, has said that the concept of zero percent interest is not valid. This means the banks are clearly not entitled to provide loans at a zero percent interest. Then how are the retailers running this offer?
Retailers and banks have found a clever workaround.The interest cost is often built into the product’s price or covered through discounts provided by the retailer. Essentially, the retailer bears the interest cost to make it seem like you’re getting a no-interest loan. It’s a smart marketing tactic to boost sales while complying with RBI Regulations.
Benefits to Lenders
Banks, NBFCs( Non Banking Financial companies ), and credit card companies offer No Cost EMI options for several reasons. No Cost EMI schemes benefit lenders in several ways :
- Increased sales volume : By offering No-Cost EMI options, lenders can attract more customers, leading to higher sales volumes.
- Fee Income: Lenders often charge processing fees or other charges, which can offset the cost of offering interest-free EMIs. Banks may earn additional fee income from other associated services or products offered alongside the No-Cost EMI.
- Embedded Financial costs: The cost of financing is often embedded in the product’s selling price, allowing sellers to increase prices slightly to cover the interest costs.
- Customer Loyalty: These schemes can enhance customer loyalty, as buyers are more likely to return to a retailer or lender that offers convenient payment options.
- Market Penetration : No-Cost EMI schemes can help lenders penetrate new markets and reach a broader customer base, including those with lower credit scores.
- Discounts and Cashback : retailers or brands may offer discounts or cash back to customers, which are funded by the banks.
No-Cost EMI Pros and Cons for consumer
PROs CONs Interest Free payment Processing Fees Budget Management Embedded finance costs Makes High- Value purchases affordable Potential price inflation Easy to access Early foreclosure charges Improves credit score Limited product eligibility L Customer loyalty programs Cancellation fees
How to apply for No Cost EMI ?
| PROs | CONs |
| Interest Free payment | Processing Fees |
| Budget Management | Embedded finance costs |
| Makes High- Value purchases affordable | Potential price inflation |
| Easy to access | Early foreclosure charges |
| Improves credit score | Limited product eligibility L |
| Customer loyalty programs | Cancellation fees |
Now that we have learned so much about NO Cost EMI. Let’s learn about applying for it. Applying for a No Cost EMI is quite straightforward. Here are the general steps:
- Choose a retailer or E-Commerce platform : Look for retailers or E-commerce platforms that offer No Cost EMI options.
- Select Your product : Browse and select the product you want to purchase.
- Check Eligibility: Ensure that the product is eligible for No-Cost EMI. This is usually mentioned on the product page.
- Choose payment method: Select the NO Cost EMI option at checkout. You may need to choose a credit card or debit card that is partnered with the retailer for No-Cost EMI.
- Fill in Details: Provide your card details and other required information.
- Complete the transaction : Verify the transaction using an OTP( one time password) sent to your registered mobile number.
- Confirmation: Once the transition is successful you will receive a confirmation, and the No-Cost EMI will be set up.
Is No Cost EMI any kind of fake scheme ?
No Cost EMI schemes are legitimate, but it’s important to understand how they work. While they offer the benefit of interest free EMIs,the cost of financing is often embedded in the product’s selling price or covered by processing fees. This means that while you’re not paying extra interest, You might still be paying indirectly through a higher product price or other charges.
It’s always a good idea to read the terms and conditions carefully and compare the total cost with a regular cash purchase to ensure you’re getting a good deal.
What happens if you foreclose your EMI?
Foreclosing a No Cost EMI means paying off the remaining balance before the end of the EMI tenure. Her’s what you need to know :
- Contact your bank : Reach out to your bank’s customer service or use their online banking portal to request foreclosure.
- Outstanding Balance: You’ll need to pay the outstanding balance, which may include any processing fees or other charges.
- Potential charges: Some banks may charge a nominal foreclosure fee or the equivalent of one month’s interest on the outstanding principal amount.
- Visit Branch: In some cases, you might need to visit a bank branch to complete the foreclosure process.
Foreclosing can save you money on interest and improve your credit score. However it’s always good to check with your bank for specific terms and conditions.
What happens if I return or cancel one product under No Cost EMI?
If you cancel a product purchased through a No Cost EMI, here’s what typically happens:
- Refund Process :You’ll need to return the product to the retailer and initiate a refund.
- EMI Adjustment: The EMI payments will stop, and any amount already paid will be adjusted against the refund.
- Potential Charges: Some banks or retailers might charge a cancellation fee or the equivalent of one month’s interest on the outstanding principal amount.
- Credit Score impact: If the cancellation leads to non-payment of the EMI, it could negatively impact your credit score.
It’s always a good idea to check the specific terms and conditions with your bank or retailer to understand th exact price and any potential charges. Typically,when you cancel a No cost EMI, The processing few is not refunded. The processing fee is usually a one-time non-refundable charge that covers the cost of setting up the EMI.
