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How does Zero cost EMI work?

Every time we are lured towards the EMI option, the possibility of it being ZERO COST is very high. Yes, who would like to pay extra for the product they want to buy although if it’s an EMI? And that is when Zero Cost EMI/No Cost EMI came into existence.

Zero-cost EMI (Equated Monthly Installment) is a financing scheme offered by some financial institutions and merchants to enable customers to buy expensive products and services without paying the full amount upfront. 

This scheme allows customers to repay the cost of the product or service in easy monthly installments without any additional interest.

Here’s how it works:

  1. You select a product or service and choose to pay through the zero-cost EMI option.
  2. The price of the product is divided into equal monthly installments over a fixed period, usually ranging from 3 to 24 months.
  3. You make a down payment (if required) and the remaining amount is divided into monthly installments.
  4. The financial institution or merchant pays the entire cost of the product upfront to the seller.
  5. You repay the loan amount through EMIs, without any additional interest or processing fee.

So, do you think that is all there is to Zero Cost EMIs?


In most cases, the interest amount is incorporated into the value of the product. For example, let’s assume you are buying a product for X amount on a 6-month EMI with an interest rate of Y. Now, what if the same seller offers you a Zero Cost EMI? The chances are, the interest amount Y will be incorporated into the product value X.

Therefore, it is a tally for the sellers even if they offer you a Zero Cost EMI. This might well not be the case with all sellers. In a few cases, the processing charges might be very high compensating the interest loss for the sellers.

So, It is important to note that although there is no interest charged on the loan amount, there may be some processing fees or hidden charges associated with the No Cost EMI scheme. It’s essential to read the terms and conditions of the scheme carefully before opting for one.

To conclude, the real cost of Zero Cost EMI is not ZERO.

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