No-cost EMI
Paying for a purchase in instalments with no interest shown. The interest usually does not vanish, it is recovered as a forgone discount or a processing fee.
No-cost EMI is paying for a purchase in instalments with no interest shown on the bill. The interest usually does not vanish, though. It is recovered another way, most often as a discount you give up by not paying upfront, or folded into a processing fee. RBI has said the concept of zero percent interest is non-existent, and that the interest is often camouflaged as a fee or through adjusted pricing. It is not a scam, and splitting a payment can be convenient, but it is rarely truly free. The quick check is to compare the cash price with the total you would pay on EMI, fees included.
Questions people ask
Is no-cost EMI really interest-free?
Rarely. The interest usually moves rather than disappears: you give up a discount you would have had for paying upfront, or it is folded into a processing fee. RBI has said the concept of zero percent interest is non-existent.
What should I check before taking a no-cost EMI?
Ask for the cash price and the no-cost EMI price side by side, including any processing fee. If the EMI total is higher, that gap is the real cost. Also check for a foreclosure fee if you may close it early.
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