The Truth Behind No Cost EMI
Many consumers are attracted to "No Cost EMI" offers when purchasing products online or in-store. These offers promise to let you pay for your purchases in installments without any additional cost. However, it's important to understand the nuances behind such schemes to make an informed decision.
How No Cost EMI Works
In a No Cost EMI offer, the retailer or the financial institution providing the EMI scheme absorbs the interest cost that you would typically pay on an EMI. Here’s how it typically works:
- Upfront Discount: The retailer might offer an upfront discount equivalent to the interest amount. This way, you pay the same total price over the EMI period as you would have paid upfront.
- Interest Cost Covered: The interest cost is covered either by the retailer or the financial institution. The price you see is inclusive of any interest.
- Processing Fee: Sometimes, there might be a small processing fee involved, which is disclosed at the time of purchase.
The Real Cost
While "No Cost EMI" sounds appealing, here are a few points to consider:
- Hidden Charges: Some schemes may include hidden charges such as processing fees or GST on the interest amount, which can add to the cost.
- Limited Availability: These offers might be available only on select products or for a limited time.
- Upfront Discount Equals Interest: The discount offered upfront might just be equivalent to the interest you would pay, which means you're essentially paying the interest in advance.
- Interest around 16 to 24 percent per annum: some times the said rate of interest is collected as some other charge. Even if they say that "no other hidden charge" but they won't give it in writting.
Disclaimer: It is crucial to read the terms and conditions carefully before opting for a No Cost EMI. Ensure you understand all associated costs and verify whether there are any hidden charges.
Conclusion
No Cost EMI can be a beneficial financing option if you understand how it works and if it genuinely suits your financial situation. Always compare the total cost of the product on EMI with the upfront cost, and be aware of any additional charges that may apply. Being an informed consumer will help you make the best decision.
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