Shopping with no-cost EMI this festive season? 3 important things to know

E-commerce giants Amazon and Flipkart have kick-started their annual festive sale offering flat discounts on the items they sell. Apart from these, banks, payment fintechs and other financial companies are offering additional offers to the customers.

One such offer is No Cost EMI. As the name suggests, this plan lets the customers pay in installments, but without any additional cost, which is usually the interest component in the loan. However, this is not true.

If you are planning to buy through the no-cost EMI route, you should be looking for answers to three important questions.

What is no-cost EMI?

Under this scheme, the customer can buy any item without paying the full amount in advance. The total price is divided into monthly installments with the promise that you will not have to pay extra.

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7;t be interested?

Contrary to what the name suggests, no-cost EMIs are not cost-free. Retailers charge the customer in two ways.

One, if the customer opts for this scheme, the discount on the item to be purchased is canceled and the item is sold at the original price. In this case, the retailer pays the discount amount as interest to the bank.

Under the second method, the interest component is hidden in the total amount that you have to pay in installments. The interest rate is not displayed in advance and is only mentioned in the fine print.

What is the benefit?

The only advantage of such plans is that if you do not have the full amount, you can buy a higher value item by paying in installments. Although the net cost works the same way as taking a personal loan, the difference is that you do not need to apply for the loan separately, as in the case of taking a loan from a lender.

In this case, you can opt for the instant plan and make a one-time purchase.

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