close
Business
close
Invest

ZERO EMI with ZERO interest – how is it possible?

Created on 20 Apr 2019

Wraps up in 2 Min

Read by 1.9k people

Updated on 19 Oct 2019

Do you know that there is no cost EMI offered by the largest e-commerce websites of India, Viz Amazon, and Flipkart? Yes, no-cost means that there is zero interest, zero down payment, and zero processing fee needed to process the EMI. Wow! That looks so lucrative but how do you think is this possible? If you remember, RBI had notified on 17th September 2013 that no financial institutes can offer ZERO percent interest loans. So, how do you think e-commerce websites manage to provide no-cost EMI with absolutely free interest.

So, before digging deeper into understanding how this NO COST EMI works for e-commerce websites, let us first understand the e-commerce business model.

So, there are three main components in an e-commerce website, which are:

  1. E-Commerce platform like Amazon or Flipkart where buyers and seller meet.
  2.     The buyers (like you and me).
  3.     The sellers (companies who put up their products on these websites to sell them).

So, when you choose a product on any of these e-commerce websites, and you proceed to pay then, you see the product value, and right next to it you see the option of ‘NO COST EMI available.’ Now, let us understand how this works with an example. Suppose you choose the product worth Rs. 10,000 online and you choose to pay on EMI basis split in three months. Now, say that soon after feeding in your card details you are given an upfront discount of 538 Rs. This makes your final payment amount to be Rs 9462. This is the amount that banks charge on providing a loan facility to you. Hence, now you know that the bank charges a total fee of Rs. 9462+Rs. 538 = Rs. 10,000.

So this is how you manage to pay Rs. 10,000 as EMI spilt over three months which means you pay Rs. 3,333 per month. And, you end up availing ZERO COST EMI facility, but the cost is actually borne by the seller or the retailer.

Another thing that you must have noticed is that this EMI is for a very short period of only up to 3 months or till up to 6 months at the max. You must have guessed by now, why is it so? The answer is simple, the longer the tenure of the loan, the more interest gets added to it, which is either borne by the retailer or the buyer. So, minimizing the EMI limit to 3 to 6 months eases out the payment pressure on both the retailers, the buyers and as well as on the banks who are abiding by the RBI guideline of providing loans/EMIs on interest. So, BINGO! It is a happy ending for all!.

So the moral of the story is that no EMI comes for free. The interest or the processing fee is charged by you only. So, be careful when jumping on buying anything impulsively.

comment on this article
share this article
Photo of Deb P Samaddar

An Article By -

Deb P Samaddar

262 Posts

12.1m Views

262 Post Likes

55

Deb is a keen learner and eager to learn about the finance world. He is that person who would never stop talking, but my oh my, the words he uses, are not something a normal human would in a regular conversation. While the conversations are well, interesting, the write-ups are faultless. With an increased proclivity towards tech and language, he aims to capitalise on his interests as a content writer at Finology.

Topics under this Article

Share your thoughts

We showed you ours, now you show us yours (opinions 😉)

no comments on this article yet

Why not start a conversation?

Looks like nobody has said anything yet. Would you take this as an opportunity to start a discussion or a chat fight may be.

Under Invest

"A few" articles ain't enough! Explore more under this category.

close
Share this post
share on facebook

Facebook

share on twitter

Twitter

share on whatsapp

Whatsapp

share on linkedin

Linkedin

Or copy the link to this post -

https://insider.finology.in/investing/zero-emi-with-zero-interest-how-is-it-possible

copy url to this post
Copied