Hidden costs of a zero-cost EMI

THE DEALER ADJUSTS THE PRICE SO YOUR INSTALMENTS APPEAR INTEREST-FREE

- SAIKAT NEOGI

With the onset of the festive season, e-commerce platforms and big-ticket retailers are offering zero-cost EMI by partnering with lenders. While it may sound appealing, the amount is blocked against the credit card limit, buyers have to pay processing fees and there's a penalty on prepayments.

The EMI amount forms a part of the minimum due. So, if the bill is not cleared by the due date, interest charges will accrue on the total due as well as new transactions, until the individual clears all dues. Missing an EMI will attract late fees and penal interest, and the delay will be reported to credit bureaus.

In a zero-cost EMI, the interest isn't waived but absorbed by the manufacturer or dealer through an upfront discount as part of their promotion. For example, if an appliance worth ₹30,000 carries a 12% annual interest, the manufacturer may adjust the price so your instalments appear interest-free. The bank still earns its interest, the seller benefits from higher sales, and you get the convenience of paying in instalments without an explicit extra charge.