EMI vs. No-Cost EMI: For college students who love buying expensive gadgets and the latest smartphones, EMI seems like a blessing. But do you know that there's a big difference between EMI and No-Cost EMI? While regular EMI involves paying interest, No-Cost EMI has a different calculation involving discounts and processing fees. In this article, we'll explain the difference between EMI and No-Cost EMI, which every college student should know.

What is EMI?

EMI stands for Equated Monthly Instalment. It's a facility that allows you to pay the full price of a product in monthly installments over a fixed period, instead of paying the entire amount at once. In a regular EMI, the bank or finance company charges interest on the loan amount. For example, if a student buys a laptop worth ₹60,000 on a 12-month EMI with an annual interest rate of approximately 14 percent, their monthly installment would be around ₹5,400. This means the total payment over a year would be approximately ₹64,800, meaning they would pay an additional ₹4,800 in interest.

What is No-Cost EMI?

No-Cost EMI is often referred to as interest-free installments, but in reality, the interest isn't eliminated. What happens is that the bank still charges interest on the EMI, but the seller or brand provides a discount equal to the interest amount upfront. For example, if the interest on a ₹60,000 laptop for 12 months is ₹4,800, the seller reduces the price to ₹55,200. The bank then calculates the EMI and adds interest on this reduced price. Ultimately, the discount and the interest cancel each other out, and the customer ends up paying a total of ₹60,000. This is why it's called No-Cost EMI. 

Which option is better for college students?

College students should carefully consider the total payment and available discounts when choosing between EMI and No-Cost EMI. They should also assess whether they can comfortably afford the monthly installments without facing future financial difficulties. While EMI allows you to pay for an item in easy installments, the total cost increases due to interest charges. No-Cost EMI, on the other hand, offers the convenience of installment payments without increasing the product price, provided there are minimal or no additional charges.

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