Unlocking the Secrets of No-Cost EMI: A Guide to Smart Shopping
In the realm of modern-day shopping, No-Cost EMI plans have emerged as a game-changer, offering consumers a convenient way to make purchases without burdening their wallets all at once. But what exactly is a No-Cost EMI, and how can you make the most of it? Let's delve into the intricacies of this financial tool and explore strategies to optimize its benefits.
Understanding No Cost EMI
No-Cost EMI, short for No-Cost Equated Monthly Installment, is a payment option that allows you to spread the cost of a purchase over time without incurring any additional interest charges. At first glance, it might sound too good to be true. After all, how can you borrow money without paying interest? The key lies in the mechanics of the arrangement.
When you opt for a No-Cost EMI option, you're essentially agreeing to pay the purchase price in installments, much like a traditional loan. However, here's the catch: while interest is indeed factored into the equation, you receive an upfront discount equivalent to the total interest amount. This means that although the interest is technically charged to you, the amount blocked on your card reflects the selling price minus the interest amount. Consequently, the total amount you pay includes only the principal amount, effectively equaling the selling price.
Consider this example to illustrate the concept further:
Selling Price: ₹1,00,000
Interest Rate: 16%
EMI Plan: 24 months No-Cost EMI
After the calculations, you find:
Total Interest: ~₹17,500
Amount Blocked on Card: ₹1,00,000 - ₹17,500 = ~₹82,500
Monthly Payment: (₹82,500 + ₹17,500) / 24 = ₹4,166.67
As seen in the breakdown, opting for a No-Cost EMI enables you to manage your finances effectively without paying additional interest, making expensive purchases more manageable over time.
Maximizing the Benefits
Now that you grasp the fundamentals of No-Cost EMI, let's explore strategies to maximize its benefits. Once you execute the purchase and around ₹82,500 gets blocked on your card, consider the following steps:
Contact Your Bank: Once the transaction appears on your card statement, reach out to your bank and express your intention to pay the entire amount upfront.
Prepayment Fee: Be prepared for a prepayment fee, typically around 3% of the remaining balance blocked on the card. For instance, if only one EMI is paid, the prepayment fee would amount to roughly ₹2,500.
Total Cost Calculation: After settling the remaining balance along with the prepayment fee, consider the total cost incurred, including one-time EMI fees and a margin for deviation.
For instance:
Amount Blocked on Card: ₹82,500
One EMI: ₹4,166.67
Prepayment Fee: ₹2,500
One-time EMI fee: ₹240
Margin for deviation: ~₹500
Total: ₹90,000
By following this strategy, you effectively save at least ₹10,000 compared to opting for full payment, making it a savvy financial move.
In conclusion, No-Cost EMI plans offer a compelling avenue for savvy shoppers to make significant purchases without straining their budgets. By understanding how they work and leveraging strategies to maximize their benefits, you can embark on a journey of smart shopping, unlocking savings and financial flexibility along the way.
Thank you for reading! For more insights and tips on financial wellness and smart shopping, stay tuned for our upcoming articles. We will be posting the details about the same on our Twitter handle @Review_Recap as well as on our website. So stay tuned for further updates.
Do you agree with our opinion that longer duration No-Cost EMI options are better than paying in full? Share your opinion in comment section below. Follow us on Twitter for real time updates.
Why should you consider longer duration No-Cost EMI options even if you can pay in full? (𝗔 𝗧𝗵𝗿𝗲𝗮𝗱)
— Reviews & Recaps BHAI (@Review_Recap) March 7, 2024
Let's break it down into two parts:
How does No Cost EMI Work?
&
How to Maximize Its Benefits?
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