No-Cost EMI Calculator

The phrase “no-cost EMI” suggests that you can pay for a phone or an appliance in instalments without paying anything extra. The truth is more subtle. The lender does charge interest, but the seller rebates it as a discount on the price. What remains for you are the parts the discount does not cover: tax charged on the interest, a processing fee, and the cash discount you give up by not paying in full. This page adds them up and expresses the result as a yearly rate you can compare with other ways of borrowing.

What the page calculates

It starts with the list price, the number of months and the interest rate the lender charges. The reducing-balance formula gives the lender’s interest over the term. Tax at the rate you enter, 18 percent by default, is added to that interest and to the processing fee. Your instalment is the list price plus the tax on the interest, divided by the months. The total you pay includes the fee and its tax, and is compared with the cash price after the discount.

A worked example

The default is a 60,000 purchase, a cash discount of 5%, a lender rate of 15%, 6 months and a processing fee of 199. Interest would be 2,652.17, with tax of 477.39, and the fee with tax comes to 234.82. The monthly instalment is 10,079.57 and the total paid is 60,712.21. The cash price is 57,000, so the no-cost EMI costs 3,712.21 more. Treating the cash price less the fee as the amount you effectively borrow, the true yearly cost is 24.5%. In the second sample there is no cash discount and the term is 12 months at 14%; the extra over cash is 1,071.23 and the true cost is only 3.3%.

Why the cash discount matters most

In the default case the biggest part of the 3,712 is the 3,000 discount that you give up. The tax and the fee are small by comparison. This is why the same offer can be a good or a bad deal depending on whether the seller also offers a cash price. If the price is the same for cash and for EMI, a no-cost EMI is close to a free loan, apart from the tax and fee. If there is a discount for paying in full, the EMI buyer pays it back through the higher price.

How to use the result

Compare the true yearly cost with what you would pay elsewhere: an unpaid credit card balance and a personal loan usually cost far more than a bank deposit pays, so the offer is worth taking when its true cost is below the rate your own alternative would cost you. If you have the cash and it would sit in an account earning little, paying cash can be cheaper than the EMI. Also compare the total, not the instalment, and watch for cancellation and foreclosure charges.

Edge cases

The number of months can be up to 60. A rate of zero removes the interest, leaving only the fee, and the tax rate can be changed or set to zero for other countries. A cash discount of zero is allowed. If the cash price minus the fee is above the total of the instalments, the cost shows as zero rather than negative.

Limits

Offers differ: some are paid for by the card issuer, some by the brand, and the conditions on tax and fees vary. The page does not know your offer, so enter the terms printed in the checkout or the card statement. It is not a legal analysis of the offer.

Related tools

• Minimum Due Calculator shows the cost of leaving a card balance unpaid.
• Flat vs Reducing Rate Converter shows how another common quote understates a loan’s rate.
• Loan Calculator gives the instalment for a normal interest-bearing loan.
• Discount Calculator works out the price after a percentage off.