Even today, in India, almost 50% of the mobile phones sold for Rs 30,000 are on EMI. And if we talk about EMI, most iPhones in India are sold on EMI. But after all, people do go on EMI. Look, it’s a simple thing. If you want to buy a mobile phone and if a good phone is not coming in your budget and you want to extend your budget, then you get the simplest option of EMI. Easy monthly installment.
What is EMI?
EMI That is, you keep giving loans every month and understand it like this. But suppose, if you want to buy a phone for Rs 10,000 and you can’t give Rs 10,000 right now and you get EMI of Rs 2,000, then you will have to give Rs 2,000-2,000 in 5 You may end up paying more due to interest months and your mobile phone will be Rs 10,000. Something like this.
The Dangers of EMI
But honestly, no matter how good EMI is, it can be very dangerous. Let me explain this. First of all, the EMI that is given in India is No Cost EMI. That is, you are going to sell a mobile phone and if you Promoted via ads like “No Cost EMI” want to buy it, you will have to give Rs 2,000 to Rs 10,000. And after 5 months, your thing is complete. That is, in 5 months, the installment of Rs 10,000 is complete and it is sold like this.
The Hidden Costs of “No Cost EMI”
However, No Cost EMI seems more interesting because there is no interest rate to be seen here. But many times we have seen that there is a hidden charge, there is a processing fee. And many times, if you delay EMI, it can be a late fee and Missed payments hurt your credit score a penalty. So in the end, the cost can be higher here.
A False Sense of Affordability
Creates a false sense of affordability No Cost EMI is only shown so that people can only be given greed that they cannot afford anything. But they can afford EMI, whether it is Apple’s iPhone or an expensive laptop or another gadget or something else. As far as people cannot afford it, it is very wrong to be able to use EMI there. Because of this, EMI can be very harmful.
EMI as a Marketing Trap
No Cost EMI, which is shown to us, is just like a lollipop. That you people are being given a lollipop of No Cost EMI so that you come in the circle of EMI. And then slowly you will spend more, then we will show our real color here.
Is EMI Always Bad?
However, whether EMI is right or wrong, we can debate about It’s a type of loan it. In some places, it seems right. For example, at the time of Haj, your mobile phone breaks down here. And you need a mobile phone immediately because your study is going on. Maybe your business is going on with it and at that time there is a requirement for you. Because of this, you can buy a mobile phone for 10,000-15,000 rupees on EMI.
Where EMI Makes Sense
I don’t think there is any such problem in it that you can’t do upfront payment now. But now what you do is buy a mobile phone in parts. I understand this thing here.
When EMI Becomes a Problem
When is the problem? When your salary is only 20,000 rupees and you can buy a mobile phone for 10,000-15,000 rupees. Can lead to overspending But still you have to buy a mobile phone for 100,000 rupees. That too just because you want to show the world. There is a problem.
Personal Responsibility and Overspending
It is not that I have such a problem. Personally, whatever money you have, you can spend your money as you want. I don’t have any problem with it. The problem will be with you people in the end. Because if you keep taking all the things here at the cost of EMI, then sometime the whole bill of EMI will have to be paid here in the end.
The Real Cost of EMI
If you go to fill it here in the end, then many times the expenses will be more here. Because people think that the price will be the same. That is, if I made an EMI of 100,000 for an iPhone, then I will complete it in 10,000 in 10 months. But they forget that EMI is a kind of loan. And the banking system of the whole world is its backbone.
How Interest Adds Up
That is, if someone is giving you a loan, then an interest rate will be applied on it. Interest rates impact total cost And in the end, while filling the interest rate, you will go beyond its price. That is, an iPhone of 100,000 rupees will cost you 100,000-10,000-15,000.
Depreciation vs Payment
I mean, I am telling you in a simple way. You are buying an iPhone, a product that is being reduced here every month. Because you have bought a new one, then the price is 100,000. If you open the box, it will be 80,000. If you run it for a month, it will be 70,000. “No cost” EMIs may hide charges Its price is falling, but you are paying more for it every month.
The Banking System Logic
Because the interest rate is also such a thing that is being applied here. And this is the principle of the whole banking world. That people take money from people by opening an account so that people’s money is deposited here. And the money that is deposited from it is given to people as a loan. On which they can earn in the form of interest here.
Luxury on EMI is Risky
This is one thing. And along with this, this is one of the worst financial decisions. That you use EMI here for luxury. If you really need it, there is a necessity. EMI can be a very good solution for you. But when necessity goes here, if luxury comes, then EMI becomes a very big thing.
Real-life Example: Cars
I have seen this in the car market. People’s work can be done with a car of 5-10 lakhs. But they forcefully stretch their budget, take an extra loan, take EMI and buy an expensive car of 20-25 lakhs.
When EMI is Justified
Anyway, there is no harm in that either. A lot of people can’t afford a car, can’t pay upfront. But still, using EMI to buy an expensive car is also not a wise decision. At least in my knowledge.
Affording vs Stretching
In some places, EMI is very useful when you can’t afford a product and need it. Whether it’s a mobile phone or a car. But when you can afford a cheap product and if you are buying an expensive phone on it, you are getting EMI. This is a problem.
Credit Score Impact and Penalties
Along with this, this low cost EMI is still one thing. But with this, you know what EMI and side effects can be. First of all, if you default the EMI payment here and get late, it will directly affect your credit score. Along with this, if you want to take a big loan in the future, then there can be a problem.
Hidden Cancellation Charges
What else can be a problem with this? If you have taken any product and if you want to pay its EMI. And you have money now, you will think that I will pay the entire EMI now. Takes cancellation charges. Sometimes companies are very smart.
Compound Interest Trap
The meaning of giving EMI is that you are being given a phone of 1 lakh and a loan of 1 lakh is being given to you. So how can I take 1 lakh or 1.25 lakh from you? This is how it works.
Time is the Real Enemy
In EMI, people often look at the interest rate. But forget that the most important thing in it is its tenure. Time period. Someone gets an EMI of 1 year, someone gets an EMI of 2 years.
Why Time Matters: Compound Interest
But I understand what the biggest problem is. EMI works on compound interest. And here I say that the biggest thing is the time period. That is, if you have studied compound interest in Maths. The time in the formula of compound interest comes in power. And as time increases, the total amount that is coming out Explains compound interest formula of your pocket will increase.
EMI and Emergency Funds
This is the biggest problem. This is why people get stuck in the trap of EMI. And that is why EMI is very harmful here. With this, I would like to tell you that there is another big problem with EMI. You literally take your financial security at risk here.
Instant Gratification vs Long-Term Stability
EMI involves financial risk Assume that if your EMI is cutting every month. And if you ever need money in an emergency. Then what will you do? Sometimes your savings are reduced. Then what will you do?
The Risk of Living on Loans
Because let me tell you what happens with EMI. You get instant gratification. That if you wanted to buy an iPhone, you can’t buy it yet. But using EMI, you bought an iPhone. You will enjoy it. But what will happen after that?
The Trap of Lifestyle Inflation
You got instant gratification from EMI. But long-term stability remains. The long-term peace of mind goes away. And with this, I have observed one more thing. Because with EMI, people start buying extra luxurious things.
EMI and Job Security
That is, your iPhone is fine here. But you will buy a more expensive laptop. You will buy more expensive things. You will go on a more expensive vacation. That too when your whole life is on loan here. And what if something happened to your job here. Some financial need came. Some medical emergency came. Then there is a problem here.
EMI and Consumerism
Because in EMI, a person gets stuck under debt. And this is a problem. Taking EMI from the iPhone is a start. But in that EMI trap, taking every new product. Going on consumerism. And taking new things on EMI. That is a difficult thing.
EMI: A Marketing Strategy
The biggest thing is that EMI is promoted in a very fancy way in this world. iPhone is an example. But if you go offline too. Go to buy any product. Which is a little expensive. Which is above Rs. 25,000. Put an offer with it that you can buy it on EMI.
Evaluate Necessity Before Buying
Whether it’s a car, fridge, refrigerator. Any item. They can buy it on EMI. And this is the biggest problem. And in my opinion, if you are buying something expensive on EMI. Then you should see how much you need it.
EMI for Investment vs Luxury
If something is literally making money for you. It is not beneficial to buy it on EMI. That is, if someone wants to drive a car as a taxi. EMI is also understood. That yes, your money will also come. Some EMI will also be deducted. And after that you will be able to make more money.
Message for Today’s Youth
That is one thing that you understand. But forcing to spend physically. This is a problem. And because of this, the youth in front of you. When they get a new job. They want to do a lot on the pretext of EMI. And they want to enjoy all the luxury things.
Final Advice
The level of patience that remains. It falls here. And the instant gratification that remains in our life. That is a very different thing. That is, you will immediately get something. You will enjoy it right now. But the peace of mind that remains in the long term. You have. It will flow here.
Conclusion
So that is a problem. So this is a suggestion. To today’s youth and youngsters. Don’t always think in the short term. EMI has both advantages and disadvantages. Pros And when you are young. If you start earning initially. Avoid EMI in the student phase. And if you really need it. And you don’t have money right now. Then you go behind EMI.
Final Thought
If you are making EMI for a long time. And thinking that you don’t have money right now. But it will come in the coming time. Then I will say, wait a little now. Once the money comes. Then go and take it. Many times. Every new product. Every shiny thing. Is not always good. So this is the suggestion for you.
