What is No Cost EMI & How Does it Work?

21^st Jan 2025...

A revolution has emerged in the financial environment, giving individuals a new path to get their dream products without the weight of paying upfront. This revolution is “No Cost EMI”- an innovative financial concept that provides convenience, affordability, and accessibility to consumers.

No Cost EMI attracts many customers because they do not have to pay upfront or bear heavy interest rates. Whether upgrading to the latest smartphone or buying that luxury accessory, No Cost EMI turns dreams into reality, allowing aspirations to come true without the fear of debt.

Read along to understand the meaning of No Cost EMI, its advantages, and more.

What is No Cost EMI?

No Cost EMI is an EMI (Equated Monthly Installment) plan given by Indian financial institutions and banks that allows customers to pay for items on an instalment basis without paying any interest on the loan. Merchants divide the loan amount into equal monthly instalments and then debit the amount from the customer’s account each month. The payback length for No Cost EMI ranges from 6 to 24 months.

It is a convenient payment method that allows consumers to extend the product cost over time and pay for it in monthly payments. It also benefits sellers by raising their chances of selling high-end items.

How No Cost EMI works?

A No Cost EMI transforms the cost of a product into Equated Monthly Installments (EMIs) with no additional fees. The vendor absorbs the interest component and compensates by selling the product at a discount. Here is a brief outline of the process:

Select the product you wish to purchase. It can be electronics, furniture, or high-end accessory.
You must check whether the product has a No Cost EMI.
At the time of checkout, select the EMI option and the tenure.
Fill out the application form for verification purposes.
Once the No Cost EMI plan is approved, the whole cost of purchase splits into equal monthly instalments based on the payback period selected. These instalments cover the principal amount with no additional interest costs charged.

Factors to consider before opting for No Cost EMI

There are several factors customers must consider before opting for a No Cost EMI. Kotak Smart EMI offers an easy instalment of up to 24 months. This section will shed some light on the eligibility criteria, their impact on credit scores, and more.

Eligibility criteria

To pass the eligibility criteria, here are some things you need to know:

A healthy credit history is necessary.
Applicant must have a stable income.
The applicant must be 21-65 years old.
Must be an Indian resident.
Must be self-employed, a business owner, a private or government employee, or a pensioner.
Must reside in the same city from where the product is being purchased (for in-store transactions)

Impact of No Cost EMI on credit score

Low-cost EMIs are an easy method to lessen your financial load. Before converting your outstanding balances to EMIs, use caution. Low-cost EMIs harm your credit score if you do not make your monthly payments on time. Consider No Cost EMIs an another debt that you must pay back monthly.

Non-payment of EMIs, like late payments on loans, badly impacts your credit report and score. Lenders will assess the negative impact before authorising a loan. As a result, it is critical to exercise financial discipline when choosing No Cost EMIs.

The difference between EMI and No Cost EMI

Another factor to consider is the difference between EMI and No Cost EMI. It helps in evaluating which methods suit your financial goals. Here is a brief differentiation between the two.

Regular EMI	No Cost EMI
A regular EMI has an interest levied on a principal amount. Each month, the amount is collectively (interest + principal) deducted from the account.	A No Cost EMI charges no interest. You only need to repay the principal amount in instalments every month.
Customers will be paying more than the actual product value.	Customers pay the actual product amount - no less, no more.

Pros and Cons of No Cost EMI

Here are some pros and cons to help you decide whether this tool aligns with your financial interests.

Pros of No Cost EMI

With No Cost EMI, you can effortlessly get high-end items.
You can manage your cash flow limits while purchasing expensive things.
Obtaining a No Cost EMI would improve your CIBIL score. Opting for smaller loans with no EMI will also help you improve your credit score if you repay on time.
You can effortlessly spread the expense of a product across several months.
You can purchase an item on a No Cost EMI using online and offline payment methods. Currently, various e-commerce platforms offer this service to their clients.

Cons of No Cost EMI

No Cost EMI solutions often have a shorter repayment period than standard loans. It means you will have to make larger monthly payments, which may strain your budget, especially if you are a student or have other financial obligations.
Even though it is a No Cost EMI, it is still a loan and may appear on your credit record. Late or missing payments might lower your credit score, resulting in difficulty in securing future loans or credit facilities.
By choosing a No Cost EMI, you may miss out on any discounts or charge waivers that merchants may provide for upfront or lump-sum payments. In some situations, paying the fees ahead may be more cost-effective than choosing the No Cost EMI approach.

Steps to avail No Cost EMI

Kotak811 offers three ways to avail of the No Cost EMI options – Instant in-store EMI, Debit card EMI, and Smart EMI card.

You can get a debit card by opening a savings account with Kotak811. They offer various savings accounts to help individuals meet their financial goals, like 811 digital savings account, 811 super savings account, etc.

Instant in-store EMI

Select the product at Kotak811 partner stores.
Enquire about the Kotak Smart EMI options.
Fill out the EMI loan application.
Complete the KYC - regular or biometric.
Make the down payment and take the product.

Debit card EMI

You must text DCEMI<space><Last 4 digits of Kotak Debit Card Number> to 5676788 to know your pre-approved limit.
Select the products.
Select the debit card EMI option and pick the EMI tenure.
Swipe the card and complete the transaction.

Smart EMI card

It is available for online and offline usage.
For offline transactions, swipe the smart EMI card and complete the transaction.
For online transactions, enter the details of the Smart EMI card and complete the transaction.

Before committing to a No Cost EMI plan, consider your financial limitations. No Cost EMI agreements might encourage overspending because the full impact of the purchase may not be evident until you begin making monthly payments.

Convenience should not be the only criterion for your decision. Given the variety of payment methods available, it is essential to consider the alternatives before committing to one that may not be as favourable as it looks.