Of late, nearly all e-commerce websites have begun to offer ‘no cost EMI’ facility on a wide range of products. It is a convenient way to purchase products, since it drastically reduces the financial burden by breaking up large purchases into affordable EMIs.
If you’re someone who is keen on opting for this facility, then it is important for you to know what the meaning of no cost EMI is. This way, you will be able to make a more informed purchase decision.
What is the meaning of no cost EMI?
Also known as zero cost EMI, no cost EMI is essentially a payment method that both ecommerce websites and retail outlets offer. By opting for this facility, buyers can make purchases and pay for them via monthly instalments. This is particularly useful if you are buying big ticket items such as electronics, home appliances, and even furniture.
The best part of this facility is that buyers don’t have to pay any additional cost like interest for converting their purchases into EMI. This is precisely why such a facility is termed as ‘no cost EMI’.
How does no cost EMI work?
Before we go ahead to the no cost EMI part, let’s first see how a regular EMI facility works.
Assume that you wish to purchase a smartphone that costs ₹20,000. Now, when you generally opt for a regular EMI facility, you will be charged interest on the purchase price for the tenure that you opt for. Let’s say that the rate of interest is 15% and the tenure that you wish to opt for is 6 months.
So, in this case, you would have to pay interest of ₹1,500 (₹20,000 * 15% * 1/2) over and above the purchase price of ₹20,000 for availing this facility. The monthly EMI comes up to ₹3,583.33 each month [(₹20,000 + ₹1,500) ÷ 6].
However, in the case of no cost EMI, you will only have to pay the purchase price over the selected tenure of 6 months. The monthly EMI in this case only comes up to ₹3,333.33 (₹20,000 ÷ 6).
In other words, you get to save the interest component of ₹1,500 by opting for this facility.
The Truth Behind No Cost EMI
According to a circular released by the Reserve Bank of India on September 17, 2013, the concept of zero interest or no interest does not exist. So then, how are retailers and e-commerce websites offering such a scheme?
Generally, when you purchase a product at no cost EMI, banks continue to levy interest on the purchase price of the product for the tenure of your choice. However, the reason why you don’t see the impact of the interest is because the seller basically gives you a discount on the purchase price of the product.
Since this discount is usually equivalent to the interest component of the EMI, you don’t get to see the impact of the interest. In other words, this interest is borne by the seller in the form of a discount.
Here’s a table that can help you understand how this actually works. For this table, we’ll take up the same example that we saw in the above segment.
|Purchase price of the smartphone||₹20,000|
|Interest on EMI at 15%||₹1,500|
|Discount offered by the seller||(₹1,500)|
|Final purchase price of the smartphone for the buyer||₹20,000|
As you can see, even with the no cost EMI facility, you continue to pay interest to the bank. However, since the seller offers a discount equivalent to the interest component, there’s no additional cost over and above the purchase price of the smartphone.
How To Avail No Cost EMI?
This facility is usually offered to credit cards from select banks. Alternatively, you can also make use of this payment method if you possess a Bajaj Finserv EMI Network Card. To avail no cost EMI, you only need to do the following —
Step 1: Visit any of our partner stores.
Step 2: Browse the products available and add the items you want to buy to your cart.
Step 3: Proceed to checkout.
Step 4: Choose the Bajaj Finserv EMI Network Card as your preferred payment mode and select the ‘no cost EMI’ option.
Step 5: Choose the tenure and make your purchase.
This sums up the meaning of no cost EMI and how it works in real life. If you’re interested in making use of this facility, apply for a Bajaj Finserv EMI Network Card right away. You can use this card to purchase all your favourite products at no cost EMI from a wide range of online and offline stores. In addition to that, you can also keep track of and manage all the transactions on the card through the Bajaj Experia Customer Portal.