How No-Cost EMI Works?

If you have ever shopped online then you must have heard about the No-Cost EMI. No-Cost EMI is a very impressive and effective scheme that allows the user to buy the product online or offline with a zero interest rate. Whenever we buy something on the EMI we usually pay the product price along with the interest rate for a specific period of time as mentioned but in No-Cost EMI there is no Processing fee, no Interest, and no down payment required. In this article, we will find what no-cost EMI is and how the companies manage to provide the customer with No-Cost EMI.

What is No-Cost EMI?

How No-Cost EMI Works

NO-Cost EMI is a Scheme that offers the customer to buy a product with an EMI option without paying any down payment, processing fee or any interest rate on the amount. The no-cost EMI is a very affordable Scheme that allows the user to pays the amount in an equally divided principle amount with no interest. Usually, the tenure is very less as compared to other EMI schemes for a maximum of a year and a minimum of 3 Month.

Eligibility for No-Cost EMI?

There are no eligibility criteria for availing No-Cost EMI, the only requirement is the Credit card or Bajaj Finserv Card. If you are a user of a credit card or Bajaj Finserv Card then you can easily opt for No-Cost EMI option while shopping online on the various online E-Commerce portals.

How No-Cost EMI Scheme Works?

According to the RBI Guidelines, no financial Institution is allowed to provide any user with 0% interest rate which brings us to the question whether the No-Cost EMI is a real scheme or not. The answer is yes it is the truth but with a twist and twist is the hidden amount. When you use the avail the no-cost EMI then you pay the bank an EMI with no cost meaning only the Retail amount of the product, however, the interest is paid by the Seller and the platform as partly bases.

No Cost EMI is a marketing Gimmick as the Final amount that you pay is stipulated in such a way that the interest that the seller and the platform have to pay the bank gets reflected upon the customer. There are two ways that can be used to cover the Extra amount on the No-Cost EMI-

  • When the discount is equivalent to the interest rate?
  • When the interest amount is added to the product price?

When the discount is equivalent to the interest rate?

In this case, the discount provided by the seller is equivalent to the interest of the product. No-Cost EMI acts on the actual price of the product instead of the discounted price which makes it easier for sellers to provide the no-cost EMI and charge the customer with the amount they wanted.

When the interest amount is added to the product price?

Another way that is used to cover the interest by the seller is by adding the interest along with the product price. Then when the customer opts for No-Cost EMI then the amount paid by the customer becomes equivalent to the interest paid by the seller.

Conclusion

As you can clearly see that the No-Cost EMI provided to the customer has some hidden amount which is charged from the customer as an interest in paying measures. The interest paid by the seller to the financial institution is hidden from the user which makes the buyer think that he is getting the product at a cheap price. When looked deeper into the break on the scheme by reading the term and Condition you can easily find out what is the actual amount that you pay.