We are in the midst of the festive season and discounts are flashing everywhere you turn your face. As such, you would be tempted to buy that TV or fridge or phone you were ardently longing for, but couldn’t lay your hands on them considering the enormous price. “Not anymore!” — proclaims one of the advertises on a famous online e-commerce website. These concerns no longer exist because of the advent of EMI facilities on expensive online products.
EMI or Easy Monthly Installment actually feels like it was invented keeping the Indian customers in mind. With festivals dotting the Indian calendar all around the year, and a prosperous population a.k.a. ‘Market’ to consume anything and everything the world has to offer, it just makes sense to make buying easier for buyers. This is especially true when you know they will be buying more this way. However, as a customer, you should always be cautious and clever when practicing this seemingly powerful facility to buy things beyond your capacity. Credit cards and EMIs while feasible could prove to be a big headache if dealt with clumsily. Here are a few tips you should remember whenever you plan to buy online, especially electronics on EMI:
Tip 1: Choose The Right EMI Option
When you are looking to buy a phone online on EMI with your Credit card, you have to be mindful of certain payments. While there is a good 12% to 18% interest rate on the EMI, some brands and banks even offer a 0% interest rate. Banks try to mitigate their losses by performing credit risk assessment before allocating you a loan. Most banks such as HDFC, SBI, ICICI etc. offer you with EMIs ranging from a period of 3 to 36 months.
Take the example of an iPhone X which is available at a discounted price of Rs. 79,999/- on Flipkart and which can be purchased using the EMI facility. Here, ICICI bank is offering multiple standard plans from 3 EMIs at 13% PA i.e. 27,247 p.m. to 36 EMIs at 14% PA i.e. 2,735 p.m. Also, you need to do the down payment along with a one-time processing fee (generally 0.5 to 1% of the total amount) and then pay the remaining amount in installments. Which means for an EMI of 3 Months, you will be paying a total of Rs. 81,741 i.e. Rs. 1,742/- extra while for an EMI of 36 months, you’ll end up paying Rs. 98,460/-, which is a whopping Rs. 18,461/- extra. This is an amount in which you can easily buy another decent smartphone.
If you are genuinely looking to buy something without the hassle of interest filled payments , then the best option is to look out for a‘0% interest EMI’ or ‘No cost EMI’. There are only a few banks which provide you with this option compared to the standard EMIs. Hence, you need to ensure your bank provides you with this facility so that you can avail its benefits. There is a certain one-time charge that they accrue though. But it is still a feasible option than standard EMI.
Let not the lure of paying less amount each month fool you into paying much more than the actual price. It is advisable to choose a moderate tenure of EMI where you can pay the monthly dues without much sweat while keeping the interest rates under control.
Tip 2: Buy Only The Essentials
Most e-commerce websites entice you with the option to buy expensive products online using Easy EMI options. The algorithm of the online websites is such that you will be searching for a TV, and a suggestion for a home theater will be displayed on the page end. You would be looking for a mobile phone, and a suggestion for covers and screen guard will pop up. All these fascinating offers are only good to bewitch you and make you spend more than you had initially planned. Whenever spending, you need to analyze and decide whether the amount you are willing to pay is congruent with your current financial situation and needs. Always remember that whether it be a TV or a fridge or a phone, it is just a product and not an asset. Hence, the value will only keep depreciating over its limited lifetime.
Tip 3: Pay Your Dues On Time
An EMI paid from a credit card is deducted wholly at one go. That means If you want to buy a TV worth 50,000, your credit limit should be at least 50,000 or more to deem you eligible. When you purchase anything on EMI, the whole amount is deducted from your credit amount and you are required to repay this amount in EMIs to your credit provider. Pay your dues on time and avoid defaulting. In this way, your credit score will also be maintained.
Hence, if you are planning to buy a TV, fridge or mobile phone this Christmas, always go for an EMI option which does not stretch your finances beyond limits. Keep your heads on your shoulders and do not get carried away in the festive fervor. We at CRIF hope you enjoy Christmas and keep your spirits & credit score high!