The catch behind No-Cost EMIs

The catch behind No-Cost EMIs

Henil Shah
/ Categories: Mutual Fund, MF Unlocked

Festive season is yet to begin, but people now are already in the festive mood. How someone can resist those offers on various things going on in the market. Then may it be online or offline, apparels to gadgets to even cars and bikes. So, all of you must be in a shopping mood and on a shopping spree. While shopping online or in some cases even in offline mode you may have come across a deal where in you don’t have to pay the interest part of the EMI (Equated Monthly Installments), rather only pay the principal in EMI format. These schemes are popularly known as no-cost EMIs or interest free EMIs. Sound’s good right? But there is a catch. According to the RBI’s (Reserve Bank of India) circular dated September 17, 2019, there is no concept of 0 per cent interest. So, in such a case what companies or banks do is they pass on the interest to the customer in the form of processing fee.

So, how all this actually works? Say for instance, you went for an online shopping to buy a gadget worth Rs. 50,000 (actual price of the product) with an EMI scheme of 6 months. The interest rate for the same is 15 per cent and the total interest amount works out to be Rs. 2,210 and EMI works out to be Rs. 8,317. So, here what online shopping sites do is that they calculate no cost EMI based on the actual price and not the discounted one. The no-cost EMI works out to be Rs. 8,333. In our case say the discounted price of the gadget is Rs. 47,790. Whether you go by no cost EMI or normal EMI you are indirectly going to pay the full amount at the end i.e. Rs. 50,000. But if you opt to pay upfront then you might be able to enjoy the discounts.

So, this festive season don’t get lure by such marketing gimmicks and rather stress on paying the price upfront (if affordable) to enjoy the discount on it. Also, this festive season start a SIP (Systematic Investment Plan) towards your festive shopping, so that by next year onward you would be having money to spend upon and that to in a well-planned manner, without disturbing your finances.

Previous Article Syngene reported 64 per cent PAT growth in Q2FY20
Next Article Bank of Maharashtra gains post healthy Q2FY20 earnings
Rate this article:
5.0

DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

Corresponding SEBI regional/local office address- SEBI Bhavan BKC, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra.
Tel: +91-22-26449000 / 40459000 | Fax : +91-22-26449019-22 / 40459019-22 | E-mail : sebi@sebi.gov.in | Toll Free Investor Helpline: 1800 22 7575 | SEBI SCORES | SMARTODR