Summary:
No-cost EMIs provide the customers with the double advantage of buying a product on instalments instead of making the entire payment up-front without paying any additional interest for making the payment in instalments.
.
There`s nothing as satisfying as having your cake and eating it too.
No-cost EMIs (equated monthly instalments) come closest to the experience for customers looking to make an expensive purchase.
No-cost EMIs provide the customers with the double advantage of buying a product on instalments instead of making the entire payment up-front without paying any additional interest for making the payment in instalments.
However, unlike the name suggests, there is no waiving off of the interest in case of a no-cost EMI.
"A no-cost EMI is subsidised or discounted either by the manufacturer or the merchant," said Adhil Shetty, CEO, Bankbazaar.com.
The merchant or the manufacturer bears the interest rate, which is an additional discount for the buyer.
Suppose you want to buy an airconditioner costing Rs42,000.
The merchant offers you two option.
Either you pay the money upfront or take a one-year loan where the EMI will be Rs3,500.
Assume the interest rate for such a loan is 18%.
In this case, the customer would have to pay ?4,207 as interest on a one-year loan.