What is No Cost EMI?

December 19, 2024

Registrationwala

EMI full form is Equated Monthly Installment. An equated monthly installment refers to a fixed payment amount made by a borrower to the lender on a specified date every month. EMIs cover both interest and principal each month so that over a specified number of months/years, the loan is paid off completely. For repaying different kinds of loans like home loans, car loans, mobile loans, etc., EMIs are pretty popular.

In this blog post, we will specifically explore what a No Cost EMI is. If you’re planning to purchase something on an EMI, you must know about the concept of No Cost EMI, and learn how it is beneficial for you.

What Does No Cost EMI Mean?

No Cost EMI is basically an EMI Scheme wherein you don’t need to pay any interest on the loan amount availed by you. Suppose you purchase headphones worth Rs. 10,000 with No Cost EMI Card, and put the entire amount on 12 months EMI. In this case, your EMI will be Rs. 834 (10,000/12) with no interest on Principal Amount (PA).

Many major banks and NBFCs offer no cost EMI on credit cards and select debit cards. However, no cost EMI is generally usually available for a select range of products. If you want to purchase something on EMI, you can check EMI availability for the same on the product detail page. Usually, gold jewellery is not eligible for no cost EMI, or even EMI in general.

Benefits of No Cost EMI

No Cost EMI is packed with a number of benefits, making it an attractive payment option for consumers. Let’s find out the top benefits of No Cost EMI:

A No Cost EMI can be availed for a variety of purchases that are small or big, without making them too heavy on the pocket.
It eases the immediate financial burden which comes with paying the entire product amount in one go.
A No Cost EMI allows consumers to pay for their product in monthly installments, without having to pay any additional interest on PA.
Even items that are really expensive become affordable with a no cost EMI.
Repaying EMI cost on time can contribute positively to your credit score, and allow you to make other purchases in future.
Certain banks may offer additional discounts on items if they are purchased through an EMI.

NBFCs & Banks Offering No Cost EMI

Here are some popular banks and NBFCs that offer no cost EMI in India:

HDFC Bank
Axis Bank
HSBC
Standard Chartered Bank
Home Credit
Bajaj Finserv
HDB Financial Services
SBI
IndusInd
Yes Bank
Kotak Mahindra Bank
RBL Bank

Things to Consider While Choosing No Cost EMI

While choosing no cost EMI option, you must take into account certain things such as:

You must only opt for No Cost EMI if you’re sure you can make monthly payments without facing any financial trouble.
If paying in installments fits your monthly budget better than paying the entire amount upfront, then you may consider No Cost EMI.
When you need to buy something costly such as a MacBook or TV but are unwilling to pay for it at once, No Cost EMI might be appropriate for you.
No Cost EMI can help you spread the cost if you aren’t getting any discounts, reward points or cashback.
Although there isn’t any interest on PA in case of No Cost EMI, your bank may charge a processing fee. Generally, this fee is billed in the first repayment installment. For instance, ICICI Bank charges Rs. 99 as processing fee for every no cost EMI transaction & HDFC Bank charges Rs. 199.
If you don’t pay EMIs on time, your credit report and score will be affected.
A portion of your available credit limit is utilized whenever you make a purchase using no cost EMI. This could have an impact on your credit utilization ratio, and affect your ability to take on additional credit until the loan amount gets repaid completely.

Alternatives to No Cost EMI

If you feel like No Cost EMI isn’t your cup of tea, you can choose another option for purchasing an item, such as:

Full Payment: Sometimes, you may get discounts when you pay the full amount at one go, making it a better choice over No Cost EMI.
Personal Loans: If you want to make bigger purchases, you can avail personal loans. Such loans may offer lower interest rates than credit card EMIs. However, it ultimately depends on the terms and conditions of the lender.
Credit Card EMI: Purchases made through credit card can be paid in installments. However, there is usually some interest amount that comes with it.

Conclusion

If you want to purchase an item but do not want to pay the entire amount upfront, you can check whether the item has EMI availability. Using the EMI option for payment allows you to pay for an item little by little, without facing immediate financial burden. Generally, banks and NBFCs charge interest on EMIs. However, when you choose No Cost EMI, no interest rate is charged. Therefore, you only pay the product’s cost. But it is important to note that your bank may charge EMI processing fee.

If you want to run an NBFC that provides EMIs and personal loans, it is mandatory to apply for an NBFC License with the Reserve Bank of India (RBI). For assistance in obtaining this license, reach out to Registrationwala.

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