What Is No Cost EMI? Meaning, How It Works & Hidden Charges

A No Cost EMI is a repayment option where you can split your purchase into monthly instalments without paying any additional interest.

For example, let's consider the case of Natasha who is a salaried employee. She wanted to buy a smart TV worth ₹36,000. But she did not have a full amount to pay at once in her account. Then, she noticed that the seller offers a No Cost EMI option on a 6-month plan.

So, she opted for it. She paid ₹6,000 per month, totalling ₹36,000. You might be wondering, is it really that straightforward? Did she really only pay the actual amount? Or how can I opt for it?

In this blog, we will see what actually happened behind the curtains.

Meaning Of No Cost EMI

No Cost EMI allows you to purchase a product by paying in monthly parts without paying any added interest. Usually, the interest is covered by the seller or brand as a discount. 

So, you repay just the listed price, broken down over the number of selected months. The following are some quick fun facts that make No Cost EMI even more interesting:

• According to an article, over 68% of credit card users opt for EMI facilities, and out of these, 57% chose No Cost EMI.
   
• Flipkart first introduced No Cost EMI in India back in 2016.
   
• Many brands use it as a smart sales booster during festivals and mega sales.
   

No Cost EMI is not just a payment option, it is a popular strategy shaping modern consumer behaviour.

How Does No Cost EMI Actually Work?

It might appear to you that you pay no interest, but there is more happening in the background:

• The financier or bank does charge interest.
   
• The brand or retailer gives you an upfront discount equal to the interest amount.
   
• The discount offsets the interest, so you effectively pay only the product price.
   

It gives you the impression that no interest is being charged.

Example: 
 

From this example, you can see that the interest charged was ₹2,520. However, the vendor deducted the same amount as a discount. This makes your total payment ₹36,000.

Ways To Avail No Cost EMI

You can access this payment facility through several methods:

• Credit Cards: No Cost EMI option available on select purchases via banks like HDFC, ICICI, SBI, etc.
   
• Debit Cards: EMIs are deducted directly from the account. This is offered by banks like Axis, HDFC, etc.
   
• Consumer Finance Partners: NBFCs provide instant EMI options at partner stores and healthcare services.
   
• E-commerce Platforms: Sites like Amazon, Flipkart offer No Cost EMI at checkout.

Popular Brands Offering No Cost EMI

Numerous brands across sectors use No Cost EMI to boost affordability.

1. Samsung is offering No Cost EMI on its premium Galaxy S25 Ultra.
    
2. Near Mother’s Day, Apple announced special offers including No Cost EMI on its products like iPhones, iPads, MacBooks, and Apple Watches.
    
3. Now, you can easily access premium tyres of Yokohama with its No Cost EMI program.
    
4. Croma launched Back-to-Campus deals with plans like No Cost EMI.
    
5. For students, HP, Dell, and Lenovo are offering limited-time deals on laptops at huge discounts with No Cost EMI.
    
6. OnePlus has announced Prime Day discounts. Also, No Cost EMI is available.
    
7. Alcatel offers 5G phones with No Cost EMI from ₹2,000 per month.

Read More – What is EMI? Full Form, Calculation & How It Works for Loans

No Cost EMI Options In Healthcare, Education & Travel

The No Cost EMI model is expanding beyond electronics:
 

Also, Snapmint is planning to expand its No Cost EMI platform. For this, they have raised $18 million.

What Are The Hidden Charges Of No Cost EMI?

At first, No Cost EMI might seem cost-free to you, but several other charges may be applied.

1. Processing Charges

Some banks and NBFCs charge a processing fee when converting your purchase into an EMI. This may range from ₹99 to ₹199 (plus GST).

2. GST on Interest

Even if your interest is adjusted through a discount, you might have to bear the GST (currently 18%) charged on the interest amount.

3. Foreclosure Charges

If you decide to repay the full amount early, then you might have to pay foreclosure or prepayment charges between 2% to 5%.

4. Credit Limit Blocking

For credit card EMIs, the full product amount is blocked on your card limit. It gets cleared in parts as your EMIs go through.

5. Late Payment Fees

Missing an EMI can attract late fees from 1% to 3% along with penal interest.

Summary: 
 

The above-mentioned table provides you with a key summary of the hidden charges related to No Cost EMI.

Tech Upgrades Made Easier With No Cost EMI 

The demand for smartphones, especially in the mid and premium range, is steadily rising in India. In fact, the Indian smartphone market saw a 4% growth in 2024, according to a report by the Indian Express. 

One major reason behind this trend is the easy availability of No Cost EMI offers. It allows consumers to upgrade without paying the full amount upfront.

Also Read  - Use This ‘Hidden’ Hack to Half Your EMIs! Essential 2025 Guide

Advantages And Limitations Of No Cost EMI

No Cost EMI has the following main advantages and limitations:
 

From the above-mentioned table, you can see what makes No Cost EMI helpful and where it may fall short. This can help you make informed choices.

Final Thoughts

You might know that No Cost EMI has become a very popular way to make purchases more manageable without paying extra interest. 

It is a convenient tool for you. Especially when you need to spread out large payments. However, it is also essential for you to understand that someone always pays the interest, usually the seller or the platform.

You should read the terms carefully, check for hidden fees, compare with available cash discounts, and choose wisely based on your financial comfort.

FAQs

1. Is No Cost EMI better than full payment?

It depends on discounts. You need to compare both before choosing.

2. Will my credit limit get blocked in case of No Cost EMI?

Yes, the entire purchase value is blocked initially.

3. Is No Cost EMI completely free?

No, interest exists but is adjusted through seller discounts.

4. Do I need a credit card to use No Cost EMI?

Not always. Some debit cards and NBFCs also offer this option.
 

Apply for Loans Fast and Hassle-Free

Apply Now

About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?