EMI and BNPL are pay-later services that help you buy something and pay for it later. EMI cards are pre-approved loan tools that can be used to buy goods at network merchant facilities without paying interest. EMI cards are easy to understand and use, and EMI card companies allow you to pay off your balance without charging penalties. Likewise, BNPL apps are a type of pay later app, similar to credit cards, in which a person buys something now and pays for it later.
How does EMI work?
The EMI process is extremely simple. Each bank has a minimum purchase amount that has to be made. When the total purchase amount at a merchant exceeds this limit, the cardholder is given the option to pay via Debit Card EMI on the merchant’s platform.
The same thing happens with credit card EMIs too. The entire purchase amount is initially charged to your credit card, and the EMI is calculated after a few days. However, you wouldn’t face any problem with a credit card as long as your transactions did not exceed the credit limit.
How do BNPL apps work?
BNPL schemes are very straightforward as well. Before you do anything, you must first sign up with a company that offers pay later services. When you make a purchase, you have the option to pay later at the checkout page. A user has to choose it. The lender, i.e., the company you have signed up with, then pays for you right away, and you only have to pay a small fee. The remaining balance can be repaid in monthly, weekly, or biweekly installments.
Hidden Charges of No-Cost EMIs and Instant Credit
Although no one rule applies to all policies, as each company has its own, here are three possible charges to consider:
Processing fees
The first hidden cost can be processing fees. When you process the loan through your Non-Banking Financial Company (NBFC) or a credit card, you’ll be charged a processing fee, which may seem nominal but increases the total price paid for the product.
GST on Interest
Although you don’t pay the interest on the product, banks will pay the interest on your behalf in the case of no-cost EMIs. However, the Goods and Services Tax (GST) levied by the government on bank services will land on your credit card bill. Therefore, one must consider this major cost when taking advantage of a no-cost EMI.
Late Payment Charges/Late Fees
Late charges or fees are applied to the loan if the consumer is not able to pay on time. These fees can be charged daily, like some platforms charging ₹15 every day.
Also, if you’re unable to pay during the no-interest period, you’ll be charged interest on the loan. The rate depends on factors like the amount spent, repayment term, credit score, etc. Most companies charge up to 24% annual interest on these schemes.
Why Goal-Based Savings is Important?
From buying a phone to planning your retirement, being smart with your money and making goal-oriented financial decisions can help you achieve your goals with increased financial stability.
The Multipl app allows you to set goals and then invest in relevant mutual funds to achieve them. The app offers many goals, including Travel Goals, Car Goals, or Retirement Goals, to help you save money. Also, you can customize your goals as per your preference. On completion, you get exclusive brand benefits in the form of brand discounts. Thus, your goal-based savings journey with Multipl can help you avoid spending more. Download the Multipl app from Play Store/App Store.
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