With the upheaval in the market economy, the volatility of the economy affects all of us. At such times saving becomes a priority for most. Yet maintaining a lifestyle is equally important. Compromising with the standard of living is a difficult choice.
You may also have worked out various options to manage your finances. If you are a buyer who avails card payment, you may have heard about the No-cost EMI. Many online sites and retail stores are offering this now. So, what is a No-cost EMI?
What is EMI?
EMI is the abbreviation for Equated Monthly Instalments. When you buy some products but choose not to pay the whole amount at the time of purchase, you can pay through EMI. This means that you prolong your payment over months by paying small equal amounts.
You incur some interest for this mode of payment. Thus, you end up paying the price of the product plus the interest calculated on the amount. So, you pay a little more than the product price.
Understanding No-cost EMI
When you buy something under the No-cost EMI scheme, you don’t pay any extra amount above the price of the product. Which means you don’t have to make any down-payment. And you buy in installment payments according to the quoted price only.
What Are the Benefits?
We know that this is a business transaction. So, there is a benefit for all here. Let’s see how does this work.
The retailers would offer a good product with No-cost EMI to attract potential buyers. For that, they may place a huge order with the manufacturer. The manufacturer gets a big business. In return, it will offer huge discounts to the retailer.
The retailer sells the products to the customers at the quoted price. There is no discount. But there will be EMI paid without extra charges. This way slow-moving or expensive inventories also get cleared.
The retailers arrange to pay interest to the bank. The bank gets its interest along with the swiping charges and the GST. The retailer pays this out of the discount on the product. This discount is not given to the customer now.
The consumer gets to buy a product at the market price without any discount. They pay in installments but there is no extra interest on the payment.
This way, the consumer makes purchases spreading out their spending. Since there is no down payment and interest on EMI, they have gained on the comfortable buying experience.
The bank gets its interest from the retailer and they are following the RBI rules. The retailer gets to attract a lot of business by this offer and sells a lot of products.
The manufacturer gets big orders and thus gets its share of a profitable business. In short, every level of the business stands to gain.
Terms and Conditions of No-cost EMI
There are limited products on which one can avail this option. Medicines, grocery and clothing don’t fall in this bracket.
It is mostly offered on gadgets like smartphones, laptops and home appliances. But this will depend on your retailer.
Sometimes old inventory may be on offer. At other times, you may get tempted to buy an expensive product or one you do not really need.
This offer is applicable only on card payment and not on cash purchases. Also, the credit card should be of the bank that offers this scheme. Your shopping site may have registered with many banks and NBFCs. This gives you a wider choice.
Return of the product will not get your interest back. The bank may even put some penalty charges. Exchange on products has some easy processes.
The tenure for this offer is limited to one year or less. Defaulting on your credit card payment will incur huge interests on your credit card. Non payment will also give you a bad reputation and affect your future loans.
The bank has its own interest charges that you have to pay. If you have an EMI card from an NBFC, the card will have its own charges.
Is It a Good Saving Option?
By the looks of it, yes. Buying something for the full payment and disbalancing your budget is not smart. Paying the same amount over a period of some months will see you in a better financial position.
It is a good option if you buy a product that you want. Many major brands become affordable to you. The immediate outflow of money is under control.
Some online sites offer better deals on such offers. This helps spread out your spending without burning a hole in your pockets.
Here, you do not get any benefit of complete upfront payment at the time of purchase. Paying through EMI gives you better options.
If you opt for No-cost EMI, make sure you know your retailer, their offer and the product you want. Read the terms and conditions carefully. Exercise caution.