In the era of online shopping, ‘No-Cost EMI’ has become the biggest attraction today. Be it mobile phone, laptop, TV or furniture, Zero Interest is written in big letters on every product. The customer thinks that by paying in installments without interest he is taking a wise decision. But the reality is that this no-cost EMI can gradually become a burden on your pocket. There are many dark truths hidden behind the claim of zero interest, which it is important for every customer to know.
Truth No. 1: You pay the interest, only the methods have changed
In no-cost EMI, the illusion is given that the bank is not charging interest. Actually the bank charges full interest on EMI. The only difference is that the seller or e-commerce platform adjusts the interest amount by treating it as a discount. This means that the discount you see is actually the interest compensation. In many cases this discount is given at the expense of other attractive offers.
Truth No. 2: Other offers disappear quietly
Many times instant card discounts, cashback or bank offers are removed once you choose no-cost EMI. The customer thinks he is saving interest, but he could have gotten a larger discount had he paid in lump sum. Many consumers have experienced that the product taken on EMI ended up being equally or more expensive.
Truth No. 3: Hidden Fees and the Impact on Credit Score
No-cost EMI may also include processing fees and GST applicable on it. Apart from this, taking EMI increases your credit limit and exposure, which can have an impact while taking home loan or personal loan in future. In case of not paying the installment on time, your credit score may also get damaged.
What is wisdom?
Be sure to compare the total cost of both EMI and lump sum payment before purchasing. Check that you are not missing out on any big discounts by taking EMI. Also, take the decision keeping in mind your income, future needs and credit profile.
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