0% APR / No-Cost EMI Calculator
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.
What to do next
Based on your 0% APR / No-Cost EMI Calculator, here are the tools you should try next:
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No-Cost EMI Hidden Interest Formula
Exposes the actual interest rate of 'No-Cost' EMIs where GST on interest and processing fees are charged.
Worked Example: ₹30,000 item on a 6-month No-Cost EMI (15% bank rate, ₹199 fee)
No-Cost EMI: Decoding the retail discounts and hidden costs
Nikhil bought a laptop costing ₹30,000 on a 6-month 'No-Cost EMI' plan. The retailer advertised 0% interest. However, Nikhil noticed a ₹199 processing fee on his statement, and his monthly bank bill charged GST on interest.
He discovered the retailer gave a discount of ₹1,304 up front. The bank then charged 15% interest on the discounted price. Factoring in the ₹199 fee and 18% GST on interest, Nikhil's actual financing rate was 18.4% p.a., not 0%.
No-Cost EMIs give a upfront discount equal to the interest cost, but bank interest is charged on the bill, which attracts 18% GST.
Compare the No-Cost EMI price with the upfront cash discount price. If the cash discount is larger, buy outright to save on fees and GST.
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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