It's A Loan: 6 Mistakes To Avoid When Shopping Online On EMI

EMI or Equated Monthly Instalment makes expensive purchases more affordable by allowing customers to spread the cost over some time. This enables individuals to buy high-value items such as electronics, appliances, furniture, and even vehicles without having to pay the entire amount upfront. EMI options are widely available across various retail outlets, online platforms, and financial institutions in India. This accessibility makes it convenient for consumers to avail themselves of EMI facilities while making purchases, thereby increasing the adoption of this payment method.

Also Read: RBI To Introduce DIGITA To Stop Illegal Money Lending Apps

The combination of affordability, convenience, accessibility, promotional offers, and economic factors has contributed to the popularity of EMI for shopping in India. However, before opting for shopping on EMI, there are several important factors to consider to ensure a smooth and financially sound transaction. By keeping a few factors in mind, you can make an informed decision when shopping on EMI and avoid any financial pitfalls.

Here are six things to keep in mind and mistakes to avoid;

1. Not accessing financial stability: Assess your financial stability and ability to pay the EMI regularly. Defaulting on EMI payments can adversely affect your credit score and lead to additional penalties. Make sure you have a steady income source and sufficient funds to cover the EMIs without straining your finances. Don’t just go for the first EMI offer you see. Compare interest rates and terms from different lenders before you decide on a loan. You can also compare prices of the product you’re interested in from different retailers.
2. Not understanding the total cost of ownership: An EMI spreads the cost of a product over some time, but it’s important to remember that you’ll be paying interest on the loan. The total cost of ownership will be the price of the product plus the interest you pay on the loan. Make sure you can afford the total cost of ownership before you commit to an EMI purchase.
3. Interest rates trends: Understand the interest rates associated with the EMI option. In India, EMI options often come with interest rates, which can vary based on the product, tenure, and your credit score. Compare interest rates offered by different banks or financial institutions to choose the most favourable option. Sometimes, paying upfront might be cheaper than opting for EMI, especially for smaller purchases. Compare the total cost of EMI with the upfront payment to make an informed decision.
4. Hidden charges: Be aware of any hidden charges such as processing fees, prepayment charges, or late payment fees. These charges can significantly increase the overall cost of your purchase. Read the terms and conditions carefully to avoid any surprises. Some lenders charge processing fees for EMI loans. These fees can add to the total cost of your loan, so be sure to factor them in when you’re budgeting for your purchase. Remember, whether you are buying anything online or offline, EMI means it’s a loan from the financial institution, that you will pay back in monthly instalments.
5. Not considering a down payment: A down payment is a lump sum of money that you pay upfront for the product. The larger the down payment, the lower the amount you’ll have to borrow and the less interest you’ll pay. Check if the product offers the down payment option.
6. Be mindful of your credit score: Your credit score will affect the interest rate you’re offered on an EMI loan. A higher credit score will qualify you for a lower interest rate. Your credit score plays a crucial role in determining the interest rate and eligibility for EMI schemes. A higher credit score can help you secure better terms and lower interest rates. Before opting for EMI, check your credit score and take steps to improve it if necessary. So, it’s important to maintain a good credit score if you plan on shopping on EMI in the future.