Why 0% EMI Schemes are not really Interest free..?
Do you really think that the interest free or 0% EMI
schemes offered by companies are actually interest free? Have you ever
wondered why any company or a bank would offer you something free of charges?
If you are not able to understand this, then you are the person who is being lured
by the companies in the form of interest
free or 0% EMIs schemes to purchase high cost consumer items you have been vying for.
What are interest free or 0% EMI schemes?
EMIs or Equate Monthly Installments means that you can buy an
item of high value today for which you can make payment by EMIs in pre-decided
period of time with or without interest.
Banks temp consumers to make big-ticket purchases by offering
to break up credit card payments into EMIs or Equate Monthly Installments Consumer durable manufacturers offer the zero per cent facility mostly on
high-value products such as smartphones, LED TVs and premium home appliances.
What is
the catch?
There are many hidden costs which the consumer fails to identify
and becomes a loser..
Like:
No Discount: If you opt for an EMI finance scheme, you forgo the discount which
is available on an upfront payment.
More
Charges: You pay more charges in the form of processing fees, file
charges and shipping or installation fees.
Additional
Credit card debt: You are tempted to buy through credit card
which ultimately adds to your debt.
Buying
stock clearance items: The easy finance schemes are used by retailers
and manufacturers to clear the inventory of goods.
How 0% is not really 0%
Suppose you plan to buy a laptop costing Rs 30000,
- · If you pay cash, you get 10% discount
- · If you opt for 0% EMI scheme, you forgo the 10% discount of Rs.3000
- · You pay processing fee of Rs 1500 for EMI scheme
- · At an EMI of Rs 5000 for 6 months, you pay 31500 along with processing fee.
· This means you pay 4500 extra for a product which could
have cost you Rs 27000 had you paid upfront
This
additional money of Rs. 4500 is 16.66% extra for a period of 6 months with an annualized rate of 33% interest.
The interest component in a zero per cent scheme is often
camouflaged and passed on to consumers in the form of a processing fee and
charges. The concept of zero per cent interest is non-existent and cannot be.
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