Festive season sales: Regular vs. no-cost EMI. Are you really saving?

Festive season sales: The festive season is officially here, and with it comes a variety of incredible deals. Whether you are eyeing that gadget you have been waiting for or upgrading your home appliances, major sales like the Amazon 'Great Indian Festival' and Flipkart's 'Big Billion Days' are making it hard to resist. Your cart is probably full of with all those goodies you have been dreaming of, just waiting for the right time and price to order.

But hold on a second! Before you hit that 'buy now' button and opt for those tempting Equated Monthly Installment (EMI) plans, let's take a quick look at what these are.

You have got options like Regular EMI and No-Cost EMI, but do you really know the difference? Are you genuinely saving money, or are you about to pay a lot more than you think? Let's break it down so you can shop smarter this festive season.

It is a standard installment payment option where the total price of the product is divided into equal monthly payments over a specified period (e.g., 3, 6, 12 months). The customer pays the original price plus the interest charged by the bank. The interest rate varies depending on the lender, credit score, and the product.

If you buy a product worth ₹50,000 with a 12% annual interest rate on a 6-month EMI, your monthly payment will include the product cost plus the interest, making your total repayment higher than ₹50,000.

A payment option where the product price is split into equal monthly installments with no interest charged. While there’s no interest charged directly to you, the retailer or bank absorbs the cost of the interest.

"With no-cost EMI, there is usually a false illusion of affordability. Actually, the interest cost is either incorporated in the product price or manipulated by lowering upfront discounts. For instance, a ₹30,000 item that can otherwise be on offer for ₹27,000 on discounts is typically charged at full price with No-Cost EMI," said Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara Pvt. Ltd.

Essentially, the customer pays the same or even higher than a standard EMI option. Just as it is with real estate investment, whereby concealed charges can shift the real value of investment, consumers need to scrutinise EMI plans prior to committing, added Maurya.

Before you click "buy now" with an EMI option, do a quick calculation.

Use a simple EMI calculator to see the total amount you will pay, including interest for regular EMI.

Is the no-cost EMI price the same as the full payment price? If not, you are likely paying a hidden cost.