On A Tight Budget? Why Worry When You Can Pay In EMIs?

With the season of festive fervor still strong, you can trust retail sites to badger you with routine notifications of round-the-clock sales. With the debt monster on the prowl, you may be compelled to reconsider your expenses. Yet, with lucrative offers flung at you, left, right, and centre, you can barely wait to get your hands on premium smartphones, LED TVs, microwaves, washing machines, refrigerators, and much more.

Much to your delight, most e-commerce giants such as Flipkart, Amazon, Snapdeal, and Myntra offer the EMI-payment option to conveniently pay for gadgets, consumer electronics, and lifestyle products. Quite interesting, isn’t it? Well, keep reading for more information on the EMI and how it can be your best friend for big-budget purchases.

 Basics of EMI for newbies

EMI or Equated Monthly Instalment is a mode of payment which allows you to break down a large upfront cost and pay it in monthly instalments. On availing the EMI option, you have to pay a fixed amount per month, along with an interest charged on the sum (or zero interest in some cases). The tenure of the payment decides the EMI to be paid each month. By making use of your Credit or Debit Cards, you can easily pay off a large sum in the form of a fixed, manageable amount paid regularly over a period of time.

Additional reading: Using Credit Card EMI To Buy Things? Know The Benefits

Oh! Here’s something to remember. You can’t avail the option of EMI if you don’t hold a Credit Card by the same bank offering the option. Don’t have a Credit Card yet? Not a problem. Start by clicking here to check your eligibility and take your pick.

Additional reading: Suit-Up For These Premium Credit Cards

EMI for loans

The popularity of EMI rests on its suitability for the repayment of loans of all sorts. Under this concept, the borrower is expected to pay fixed periodic payments to the lender each month. Just like the EMI for an online purchase, the EMI for a loan comprises the principal amount and the interest. What’s more? The EMI facility is available for Home Loans, Car Loans, and Personal Loans.

Additional Reading: How EMI break ups are done in Personal Loans?

Excited? Here’s a little more! You can even avail two-wheeler loans that let you make payments through hassle-free EMIs. Click the link below for the easy calculation of your EMIs.

Additional Reading: EMI Calculator: Calculate your Loan EMI & Total Interest Due

 Pitfalls of no-cost EMI

One of the marketing gimmicks that you should steer clear of is the concept of the no-cost or zero-cost EMI. With the digital footprint geared towards a soaring high, this is a smart move by many e-commerce retail giants. Hey! There’s no need to panic as the pointers mentioned below are sure to keep financial hiccups at bay.

Why should you be wary of the No-cost EMI? Here’s the catch. Even though you would be misled to think that this scheme of payment does not entail an interest, the truth is, the bank will make up for it by charging you an interest. Let’s take a look at how this works.

The discount offered by the retailer is often charged as interest. So, the discount makes up for the interest on the EMI, making it a ‘no-cost’ EMI. However, the retailer will not pay the tax applicable on this interest. This means that you are actually paying much more than the cost of the product. Here’s an example.

The actual cost of the product: Rs. 40,000

Discount offered: Rs. 3,250

Cost of Mobile phone post discount: Rs. 36,750

Total interest to be paid under EMI: Rs. 3,250

GST @ 18%: Rs. 585

Total amount to be paid by you Rs. 40,585

So, you actually end up paying more for the product which might be available at an actual discount with other retailers.

Additional reading: No-Cost EMIs: Busting Myths

 Can’t pay EMIs on time? Here is what you need to know

Imagine this: You took a loan a year ago. Currently, you are out of a job and faced with difficulty in paying your EMIs. Relax; unavoidable circumstances such as these are not rare. Here is what you can do.

Step 1: Well, the first thing to do is to take a few deep breaths and consider a way out of the problem. Defaulting the loan is not a wise solution because your bank may charge penalties for missing EMIs.

Step 2: Get your papers in order and inform the bank. With all relevant information such as the date of taking the loan, loan amount, tenure, EMI, and associated documents at hand, notify the bank of the reason for your inability to pay the loan EMI. Informing the bank that you are willing to repay the loan will work in your favour.

Step 3: Depending on the nature of your problem, the bank may consider refinancing your loan by reducing the EMI amount, defer the payment till you are financially stable or allow a lump-sum loan settlement.

Additional Reading: 6 Smart Ways To Manage Your Home Loan EMIs

While we are on the topic of loan defaulting, here is something you can consider. As much as possible, try to avoid delays in the payment of loan EMIs as this takes a toll on your Credit score. Yes, you read right! A good Credit Score makes you more creditworthy and increases the chances of approval of loans in the future.

Additional Reading: How Late Payments Can Leave You Credit-Sore!

Now, with your EMI game on point, feel free to check out the curated offers at BankBazaar to sail through life with your finances sorted. If you are new to Credit Cards, fear not. Keep calm and check out the link below for insights on Credit Cards and how to choose the right one.

Additional Reading: Top Of The Chart Credit Cards For 2018

PS: With the ability to shrug off the daunting task of paying high upfront costs, EMIs come with the responsibility of making timely payments. All the best and happy shopping!