No Cost EMI Scheme –
The festive season is on the way, where people shop both online and offline, they are offered various products like mobile phones, refrigerators, etc. on no-cost EMI or zero-cost EMI. While purchasing such expensive products and when u get to know about no-cost EMI, you are easily attracted towards it. We all are aware that paying in EMI removes the burden of paying the entire amount upfront. But there is a catch in these no-cost EMI schemes. You will have to pay a certain hidden cost for such schemes.
The hidden cost of No Cost EMI –
When you buy something on this scheme, then you get a pre-decided credit limit to convert your purchases into EMIs. Now, since the lender cannot charge an interest directly, the interest is included indirectly by charging you a higher price on the product, which you would have otherwise received on a discount. Many lenders may also charge a processing fee on a no-cost EMI. This allows them to charge the interest indirectly. Also, you have to pay GST at the rate of 18% on the interest to the lender.
Difference between normal EMI and Cost EMI –
When you go for the normal EMI you have to make monthly repayments that will include the principal amount and a pre-decided interest rate. Also here you are aware of the interest rates charged for the same. While in the case of No Cost EMI, the interest component is either added to the product price, charged as a processing fee, or adjusted with the discount available on the non-EMI product.
How does it impact your credit score?
Not paying a no-cost EMI loan can have a negative impact on your credit score. It is essential to check your repayment capacity before you opt for multiple no-cost EMI schemes to avoid delays or defaults in repayments. No-cost EMI offers may be good for consumers who choose the product carefully and go through the terms and conditions of the schemes offered before making a big purchase. Thus analyze all the factors and only then go for a no-cost EMI.
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