The Pros And Cons Of No-Cost EMI And Is It Right For You
Even with its obvious advantages, a lot of individuals are still unaware of the EMI payment option. Given that EMIs have been around for a while and are actively supported by financial institutions & instant personal loan app, this is unexpected. You will be able to understand the broad idea of EMIs with the aid of this article.
How does EMI work?
If there is no default or partial payment during the loan’s term, the EMI for a fixed-interest rate loan stays unchanged. An outstanding loan’s principle and interest are settled with the help of the EMI. The principal component is lowest, and the interest component is higher in the first EMI. The primary component increases while the interest component decreases with each succeeding EMI. As a result, the final EMI has the lowest interest component and the largest principal component.
If a borrower prepays during the term of a running instant money loan, either the initial loan duration or the succeeding EMIs are shortened, or both may be shortened. The opposite occurs if the borrower skips an EMI during the loan’s term (EMI holiday, cheque dishonor/bounce, or insufficient balance in the event of auto deduction of EMI or default); in that scenario, either the loan’s tenure increases or the amount of subsequent EMIs increases, or a combination of both, in addition to drawing any applicable financial penalties.
The legal aspect of no-cost EMI.
Notifications have been released by the Reserve Bank of India (RBI) explicitly denouncing the sham of the free EMI plan. It makes clear in its 2013 circular that there is essentially no zero percent APR or free EMI. According to experts, the interest amount is included in the price of the product in no-cost EMI agreements. It’s also common for lenders and retailers to give interest-free instant credit while selling products and services at exorbitant markups.
Advantages of no-cost EMI
The following are the significant advantages of obtaining a quick loan approval & free extended payback plan (EMI) that will assist you in managing the financial strain that typically arises when making a large purchase.
●Even while purchasing pricey goods, you can effortlessly manage your cash flow limits.
●Both online and offline payment systems are available to you when buying an item for free interest. Furthermore, a number of e-commerce platforms currently provide their clients with this service.
●Moreover, obtaining free EMI will raise your CIBIL score considerably. If you choose smaller loans with free interest, you will improve your instant credit line as long as you make your repayments on schedule.
Disadvantages of no-cost EMI
No-cost EMI does come with a number of drawbacks, even though it can provide some financial relief.
●For the no-cost EMI, customers might be required to pay a certain, non-refundable processing fee.
●Some NBFC companies only provide EMI cards to clients whose credit scores are higher than a particular threshold. It suggests that not every client is eligible to receive the advantages.
●No-cost EMIs may persuade a buyer to purchase unnecessary goods. The amount paid as interest will be deducted from the customer’s refund if they decide to return the item.
Conclusion:
After weighing the benefits and drawbacks of free interest on purchases, people should only use this payment option when they are certain about their purchase. It’s best to use the free EMI option to pay for items that fit into your “needs” category rather than items that fit into your “wants” category.