No-cost EMI and their hidden costs: No-cost EMI or zero-cost EMI offers look very tempting at first glance. Usually, you must have seen many such offers given by banks or credit card companies during online shopping. Many times, such offers are also given in offline shopping. But these offers don't need to be actually as beneficial as you think. This is because many such offers are not actually completely no-cost or zero-cost. There is also a cost hidden behind such offers that sound very attractive. On observing minutely, it is found that many types of costs are actually hidden in these offers as well. Therefore, if you are also thinking of shopping by taking advantage of any such offer, then first get complete information about it.
Regular EMI vs No-Cost EMI
When you buy something through EMI, you are actually taking a loan, which has to be repaid in the form of monthly instalments. In regular EMI, a part of this instalment is the principal amount and the rest is the interest. Apart from this, you may also have to pay loan processing fees in the beginning. Also, every time you pay EMI, you also have to pay Goods and Services Tax (GST). In the case of no-cost EMI, usually, the customer has to pay the interest along with the EMI, but the same amount is given to you in advance as a discount by the seller or online shopping portal. That is, the interest that the customer pays along with the EMI is compensated in advance as a discount.
The hidden cost of no-cost EMI
In no-cost EMI, although the amount equal to the interest is already given as a discount, but customers may have to pay processing fees to banks or financing companies. Along with this, GST also has to be paid along with the EMI, which is a cost from the customers' point of view. The amount of GST is equal to 18% of the interest. Apart from this, many other expenses like pre-closure fees, pre-payment penalties, and late payment charges may also be associated with it. However, many customers make purchases without paying attention to these hidden costs. So the next time you think of making a purchase through a no-cost-EMI scheme, then definitely keep these hidden costs in mind.
