Personal Loan: Is zero-cost EMI for a loan just a myth?

The concept of zero-cost EMI loans is one of the most preferable and attractive options for borrowers. Be it getting that latest gadget or an exotic holiday outing, you can avail no-cost EMI loans on a wide range of products and services these days. With the rising adaptation of digital transactions, no-cost EMIs options have found larger acceptance among customers, mostly among the youth.  

Though it looks lucrative the zero-cost EMIs may not be actually free of cost. Many no-cost EMI options come with hidden charges and at times you end up paying even the equal amount that you would have paid for a personal loan. Before availing a no-cost EMI loan it’s advisable to read the fine print carefully.

Is zero-cost EMI for a loan just a myth?

At first glance, a no-cost EMI loan appears magical. You receive the product that you want and there are no fees or interest charged. But, the reality is something different. The no-cost EMI or EMI free credit facilities are not entirely free either.   

1. Hidden Charges: These are loans where the lender offers the loan amount to purchase a product without any interest charge. However, there could be hidden charges and that would have been added to your product prices. These charges could vary as per the deal between the bank and the product manufacturer or seller.
2. Inflated Product Prices: Many stores increase the cost of items sold through zero-cost EMI deals. The product price is increased to adjust the interest component on the no-cost EMI.  

How to avoid paying more when considering a zero-cost EMI loan?

To avoid paying more when considering a zero-cost EMI loan, it's crucial to pay attention to the fine print and consider a few key factors:

1. Loan Tenure: Zero-cost EMI is mostly available on the basis of fixed term loan. The repayment tenure of your loan will be set by the bank based on their policies and your loan eligibility.
2. Down Payment: Some zero-cost EMI schemes also require an upfront major initial payment. This means that it's important to take a closer look at the difference between the down payment you make and the EMI amount.
3. Credit Score Impact: If you are going to apply for a zero-cost EMI loan you have to remember one thing that most lenders offer this facility based on the credit history of the borrower. Keep track of how often you choose this kind of loan, because several queries from the bank can downgrade your credit rating.

To sum up, zero-cost EMI in India is not entirely a myth, but there is a catch. Check out the terms and conditions and know what you are signing up for, do the math on the total cost of the loan, and explore other funding opportunities. Keep in mind that it is smart to take loans with due diligence on the nitty-gritties rather than being tempted by its apparent simplicity.