These days, when you buy a mobile phone, fridge, or even book a holiday, you often see the option of “no-cost EMI.” This offer of paying in monthly installments without interest is very attractive.
It’s especially popular among young buyers and those using credit for the first time. But is a no-cost EMI truly free of interest? Do customers really avoid paying any extra?
Is No-Cost EMI Truly Free?
At first, “no-cost EMI” sounds like there are no extra charges. But in reality, the interest isn’t removed—it’s just included in a different way.
The cost of interest is usually added to the product price, or it is covered by the retailer, manufacturer, or finance company as a kind of discount.
For example, if a phone normally costs ₹15,000, its price might be raised to ₹16,000 under no-cost EMI to cover the interest.
Helps Improve Credit Score
Paying EMIs on time can help improve your credit score. This is especially useful for people with no past credit history. It shows that you can manage credit responsibly and make timely payments.
Important Things to Keep in Mind
If you take several no-cost EMI plans at once, your credit report will show multiple open loans. If your income isn’t enough to handle all of them, this may hurt your credit rating.
Also, missing even one EMI can negatively affect your credit report. Suppose you have three loans—for a mobile, a TV, and a home—and you miss just the mobile EMI.
That will still show as one default out of three, lowering your credit score.
Each time you apply for a no-cost EMI, the bank checks your credit score. This is called a hard inquiry, and too many of these can also bring down your credit score.
Maintain a Healthy Balance
Credit allows people to buy expensive items, and no-cost EMI plays a big role in making that possible. But taking too many EMIs at once can create financial stress.
A good rule is to keep your total EMI payments within a reasonable portion of your income. Also, check your credit score regularly.
This helps you stay in control of your financial health.
