No Cost EMI is basically an option offered by sellers in collaboration with banks wherein you do not need to pay any additional interest on the principal amount. It is also known as Zero Cost EMI.
Several online and offline retailers selling consumer durables products tie up with banks in order to offer a No Cost EMI option. Customers typically avail this facility, as it helps them avoid paying large amounts upfront. But do you know what is the actual cost of No Cost EMI?
Let's understand how the No Cost EMI works. Is it really a no-cost, and should you opt for it?
When you purchase a product from a seller with No-Cost EMI, you generally don't receive the discount you would have received for purchasing the product with an upfront payment. The discount amount goes to the bank offering the EMI facility.
In other cases, the interest amount for using the EMI facility is included in the product's price. So, if the interest amount accounts for INR 3,000, the seller would increase the product's price by INR 3,000 and sell it with no-cost EMI. Moreover, no-cost EMI schemes generally have shorter repayment tenures.
Many institutions also charge a small processing fee for processing the loan. While this may not be a significant amount, it's still something you should keep in mind.
So, what is the actual cost of No Cost EMI? After understanding how the scheme works, it is important to note that No Cost EMI is not actually a No Cost facility. In short, you end up paying full price for a discounted product or an additional interest charge in the form of processing fee or others if the product is not discounted.
After knowing the No-Cost EMI hidden charges, you might be discouraged from using this facility. But here are some reasons when you should opt for it:
When you are planning to buy an expensive consumer durable or popular product that is out of your budget.
When you think it is a good deal considering the additional discount.
When you do not have enough funds to pay upfront.
When you want to start building your credit score.
Now that you've understood what is No-Cost EMI and how it works, you can take advantage of the Xpress EMI facility on the AU Credit Cards range. As part of this facility, you have the option to choose No Cost EMI available on select brands. If you are purchasing any product that is valued at INR 2,000 or above, then you can easily convert to large amount into monthly EMIs.