Key Takeaway
Zero APR financing is not free money. The cost is typically built into a higher product price (5–15% markup). Always compare the zero-EMI price against the cash/upfront payment price before deciding.
No-Cost EMI Hidden Costs Breakdown:
- Cash upfront cost (price after discount): ₹57,000.
- No-Cost EMI total cost: ₹60,676.
- Upfront Product Price: ₹60,000
- Processing Fee: ₹199
- 18% GST on Interest Component: ₹477
- Selecting the EMI plan over paying cash costs you an extra ₹3,676.
- This makes the equivalent true cost of financing equal to 17.83% APR p.a.
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Frequently Asked Questions
What is a 0% APR or No-Cost EMI?
It is a retail promotion where you buy an item on EMI without apparent interest charges. The retailer offers a discount upfront matching the bank's interest cost.
What are the hidden charges in No-Cost EMIs?
Hidden charges include bank processing fees, 18% GST charged on the interest component, and the loss of cash discounts that would be available for upfront purchases.
How is the effective APR calculated for No-Cost EMIs?
Effective APR is calculated by finding the Internal Rate of Return (IRR) on your actual cash outflows, which is typically 12% to 18% p.a. due to GST and fees.
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