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Are Purchases made on EMI Good or Bad!

An Equated Monthly Instalment (EMI) is a fixed monthly payment, part of the equally divided repayments, used to pay off your outstanding loan amount.

With an EMI scheme, you can purchase any product and begin using it immediately, while you pay the price over an extended period of time in installments. You can shop for things like a smartphone, camera and home appliances with an EMI shopping app.

With Finserv MARKETS App you can track your EMIs, make payments in a timely manner and shop at No Cost EMIs from a range of 25,000+ electronic products & household appliances from our retail partners & Partner Brands all available on our EMI Store. You can also avail delivery within 4 hours, exclusive cashback & Digital Goldback offers on the Finserv MARKETS App.

Cost to be borne while opting for an EMI scheme

Higher amount paid

Mr. Mehta opted to purchase his laptop worth Rs. 40,000 through an EMI scheme which was in tie-up with his credit card company. The EMI payments were for 6 months, which should have worked out to a down payment of Rs. 4000 and 6 EMIs of Rs. 6000 each.

Later Mr. Mehta discovered that he had to pay a down payment of Rs. 4000 and 6 EMIs of Rs. 6833 each.

Which means, he ended up paying Rs. 5000 more on the product when compared to the price he would have paid had he opted to purchase it with the EMI scheme. This is because most EMI schemes come with a hidden cost – the interest rate that you have to pay on the amount.

Additional cost & charges

There are additional costs that are applied by most credit card companies. They charge a processing fee on your EMI scheme. This cost is a percentage on the transaction amount and varies from bank to bank.

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No discounts

Some banks tie-up with merchant outlets and offer the EMI option on various products. However, most products carrying the EMI option do not offer benefits like a discount or any offers attached to them. Hence you need to choose your bank wisely and look into any additional or hidden costs when opting for an EMI scheme.

Pre-closure penalties

When you purchase a product on an EMI scheme offered by your credit card company, it is most likely that pre-closure penalty charges will apply. If you have the cash to pay off the entire loan amount before the completion of the total number of EMIs, you will have to bear pre-closure penalties.

Default in payment of EMIs

When you fail to make your EMI payment, you will get charged with the normal interest rate for non-payment along with the late payment fee and taxes. The EMI amount, in addition to being subject to these charges, will carry the basic interest rate thus causing an unpleasant effect.

Things to keep in mind before opting for an EMI scheme

There are several costs attached to EMIs, you must, therefore, evaluate the offer before you opt for it. Always remember to read the fine print cautiously, as credit card companies can change terms at their discretion.

Also, before making the purchase you must check all the options for the product in other stores – both online and offline and see if you can get it at a better price in case you do not wish to opt for an EMI.

Remember to evaluate all costs associated with the EMI scheme and then move ahead with it or reject it.