Nowadays many customers opt for no-cost EMI when they buy Electronic gadgets and home appliances like refrigerators, air conditioners, mobile phones, etc. If we buy a product through paying EMI’s are eligible for the moratorium. And if the products are purchased with no-cost EMI scheme are also eligible for a moratorium but the customer may end up paying generous Interest rate for the loan amount. Bajaj Fiserv, among the leading lender of consumable durables, is charging 24% Interest for no cost Loans.
For example, if the product costs Rs 60000 and the EMI amount is Rs 5000 per month if the rate of Interest is 24%. The customer has to pay extra on the outstanding loan amount of Rs 15000. (5000*3).
This Interest is applicable for only those opt no-cost EMI loans and If the moratorium is granted. The rate of interest is charged based on the contracted rate to the extent of the period of EMI moratorium is accrued. Aforesaid Interest is collected by expanding the early tenure of the loan granted. Which increases the cost of the product.
Many customers believe that No cost EMI loan is free from any Interest but in reality, some hidden charges are included in different forms. In some cases, processing charges are also included when we buy a product for no cost EMI.so It is vital to have a look at the terms and conditions before selecting them.
In 2013, RBI circular offered “zero percent” EMI schemes for credit card outstanding’s are again drive to the customers in the way of processing fee. So they warned those customers who have a plan to opt for No cost EMI schemes even if the customer opts for that they should avert the availability of Moratorium because the cost of moratorium adds up the product cost. Bajaj finance company has the highest percentage of moratorium of 70%.In case of SBI decided to extend the moratorium by another three months. According to the latest report No cost EMI moratorium can cause financial distress to a large number of retail borrowers because they find it difficult to pay large EMI’s.