Unlike the previous zero percent EMI which was ruled out by the RBI as loans cannot be extended without interest on it. The new no-cost EMI charges interest but the same is adjusted from the sale price of the product. What this means is consumer does not have to pay over and above the sale price of the bought good. More, so oit's a subvention offered to consumers by manufacturer or seller.
Let us understand how your interest component is adjusted on the product cost you purchase
Suppose you buy a TV for as much as Rs. 25000 and the retailer offers you a discount of upto Rs. 2000 as no-cost EMI waiver then after paying the discounted price for it, the discount is adjusted by the interest payment which is debited from your bank account.
Usually, no-cost EMI offers discount in the range of 12-15% which depends on the tenure as well as product, seller as well as loan financier.
Some Disadvantages Of No-Cost EMIs
Not all financiers extend this loan.
If it extends no-cost EMI then it can well be the case that the offering is made only to institution's existing customers.
Generally such a deal is only available on a credit card and in case the same loan offering is availed through an offline route then processing charges also apply.
Also, in line with the loan offer, some of the NBFC company offer EMI card which is provided only to customers who have a credit score over some value.
The no-cost EMI is not available for all product types or brands, so the financing with some additional charges , may not be an option in all case.