The option of No Cost EMI is often seen during online shopping, especially when you want to buy expensive items like smartphone, laptop, TV, fridge but do not want to spend the entire money at once. This facility seems to be an easy way to divide a large expense into small monthly installments, and the most important thing is that there is no additional interest to be paid. But is it really completely “no cost”? Let us understand in detail what No Cost EMI is, how it works, what are its benefits and what things are important to keep in mind.
What is No Cost EMI?
No Cost EMI is a promotional payment plan, in which the price of the product is divided into equal monthly installments (EMIs), and the customer does not have to pay anything more than the original price of the product. That means no additional interest or finance charges are visible. This is very useful for those who cannot pay in full in cash, but want to avail the goods in monthly installments that fit into the budget.
How does No Cost EMI work?
A normal EMI includes interest, which increases the total payment amount. But in No Cost EMI, interest is not charged directly from the customer. Actually this interest is covered by the brand, seller or retailer in the form of subsidy or discount.
Understand with example:
Suppose the price of a smartphone is ₹30,000.
You can get a discount of ₹ 2,000 if you buy in cash (available for ₹ 28,000).
By choosing No Cost EMI, you have to pay only ₹30,000 (₹2,500 x 12 in 12 months), but there is no discount.
The bank charges interest, but that amount is adjusted by the discount given by the seller.
According to Kotak Mahindra Bank, this way it appears to be “no cost” to the customer, but in reality the interest is hidden (in the form of a discount). Sometimes the MRP of the product is shown slightly higher.
Benefits of No Cost EMI
resilience: You can buy big items without spending a lot immediately.
Budget Management: Monthly installments are small and can be paid easily.
Improve Credit Score: Paying EMI on time strengthens your credit history.
Attractive in festive sales: Often available on Amazon, Flipkart, Reliance Digital etc.
Keep these things in mind while choosing No Cost EMI
Read the terms carefully: Check complete offer details, tenure (3-24 months), processing fees, foreclosure charges etc.
Compare Discounts: You may miss out on cash discounts, cashback or other offers if you choose No Cost EMI. Calculate the total cost.
Hidden Charges: Processing fee (1-3%), GST (18% on interest), cancellation penalty etc. may be applicable.
Product Eligibility: This offer is not available on every product; Applicable on minimum amounts or specific brands only.
Budget Check: The installment should fit into your monthly budget, otherwise default may damage your credit score.
RBI Guidelines: RBI has deemed “zero interest” as misleading, so transparency is better now, but still be careful.
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