OPTING FOR NO-COST EMI TO BUY CONSUMER DURABLES

No-cost EMIs are quite helpful for individuals who need to make necessary high-ticket purchases like gadgets and can’t afford upfront payment but they must be aware of pitfalls

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No-cost EMI is one of the most popular financing options for high-ticket consumer durables such as gadgets and home appliances. It allows consumers to defer high-value purchases over several monthly instalments without any additional interest charges. Popular e-complatforms such as Amazon, Flipkart, Ajio, TataCLiQ and more offer the no-cost EMI facility in collaboration with leading card issuers. But is it truly as beneficial as it seems? Let’s take a closer look at the benefits of no-cost EMIs and some key factors to consider when opting for it.

How it works?

Unlike regular EMI transactions that come with additional interest charges, no-cost EMI allows you to divide the cost of a product into monthly instalments without any interest. The interest is still factored into the EMI, but merchants or lenders offset it by providing an equivalent discount.

Here is an example. Suppose you are buying a refrigerator worth ₹60,000 using credit card EMI for a tenure of six months. If the card issuer charges an interest rate of 16% on EMIs, the total interest charged will be ₹9,600, along with 18% GST on the interest component, amounting to ₹1,728. In a regular EMI plan, you have to pay the product price and the interest amount along with GST, which means your total outgo would be ₹71,328.