Actual cost of no-cost emi

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Actual Cost of Zero Cost EMI

Ever craved for that dream phone or the latest gadget, but your wallet screamed "not today!!"? And then the Superhero “Zero cost EMI” comes in to rescues you? Let's see if this superhero is truly granting wishes or just playing a clever trick.

What is Zero Cost EMI ?

Zero Cost EMI or No-Cost EMI, is basically a way to buy stuff in monthly instalments without paying any extra interest. Spread the cost over months like tiny payments, and ditch the big chunk.

Example: ₹60,000 phone 🤯 (Can I afford it?) = ₹5,000/month with Zero Cost EMI 🦸 (Bam!! Surely I can afford it). Phone in hand. Sounds magical, right?

The Motive Behind the Magic:

Here's the trick: While we might not see an explicit interest rate, there are two ways the cost gets covered:

• The Price Shuffle: Sometimes, the interest cost is simply baked into the product price. That fancy phone you saw for Rs. 15,000 with "No-cost EMI" might actually cost Rs. 17,250. That extra Rs. 2,250? That's the hidden interest you'll pay back in instalments.

• The Discount Disguise: In other cases, retailers might forgo the upfront discounts they typically offer for cash purchases and use that money to cover the interest cost. This means you're essentially paying the interest indirectly, making the purchase costlier in the long run.

But wait, there's more! While these are common tactics, some companies might genuinely offer true Zero Cost EMI. Especially in competitive markets, offering Zero Cost EMI is like giving your store a superhero cape. They might absorb the interest cost themselves to increase sales and gain customer loyalty. However, this is less common and often comes with specific terms and conditions, like minimum purchase amounts or specific product categories.

Lenders: The Secret Benefactors of Zero Cost EMI?

So, Zero Cost EMI sounds great for us shoppers, but what about the lenders? Are they just benevolent financial fairies granting wishes? Not quite. Here's the lowdown on how lenders benefit from this seemingly magical scheme:

• Brand Bonanza: By making purchases more accessible, lenders position themselves as the financial fairy godparents. This positive perception translates to a better brand image, attracting more customers and potential partnerships.

• Data Mine: Zero Cost EMI schemes generate a treasure trove of customer data – spending habits, preferences ans much more. This data goldmine helps lenders tailor their marketing strategies and develop new products, keeping them ahead of the curve.

• Plastic Fantastic: Think credit cards and digital wallets are just for fancy coffee purchases? Think again! Zero Cost EMI often involve these payment methods, meaning more swipes, more transactions, and more moolah (money!) for lenders (cha-ching!).

• Fee Fiesta: While there might not be interest, processing fees and commissions can be a hidden gem for lenders. It's like a sprinkle of magic dust on their bottom line, adding a little extra sparkle.

The Verdict: Knowledge is Power:

There's no simple "yes" or "no" to Zero Cost EMI. It's all about responsible spending and understanding the terms before diving in. Budget wisely, compare offers like a hawk, and prioritise needs over fleeting wants. Remember, it's your wallet, not a magic trick!

Tips for Wise Spending:

• Do your math: Calculate the total cost of the EMI, including processing fees, to see if it truly fits your budget.

• Compare, compare, compare: Don't settle for the first offer. Shop around for the best terms and interest rates. Competition in market is our biggest advantage.

• Needs vs. Wants: Be honest with yourself. Do you really need that juicer, or is it just a desire fuelled by the EMI allure?

• Invest the saved amount: If you have the full amount, consider investing it while paying the EMI to earn some extra returns.

Remember: You're the master of your financial destiny. Use Zero Cost EMI wisely, and it can be a powerful tool. But misuse it, and it might just turn into a financial foe in disguise. So, stay informed, make smart choices, and happy shopping!

P.S. This newsletter is for informational purposes only and does not constitute financial advice.

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Until next time; Keep Learning, Keep Sharing!!