BasuNivesh

Personal Finance Blog

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It is festive mood across India and we are all very much eager to buy home appliances or mobile gadgets on these auspicious days. So few consumer durable companies or intermediaries offer you banned 0% interest in different format. Once such offer is Univercell UMI.

Univercell UMI

Recently, while crossing the road I came across Univercell Showrom, which highlighting the offer called 0% UMI. With eager (not to buy, but to know more about ZERO PERCENT OFFER), I visited the showroom and found some interesting and banned loan offerings.

What is this Univercell UMI?

When I visited the showroom and asked for this offer, they gave me a contact number of Bajaj Financial Service executive. So I called him and found that it is actually a Bajaj Financial Service offer to Univercell customers (which sells mobiles and accessories). Below are the features, which shared by an executive.

  • ZERO PERCENTAGE interest rate!!!
  • This is from Bajaj Financial Service.
  • This offer is not for all mobile phones. However, to selected few models.
  • One must have minimum Rs.20, 000 take home monthly salary.
  • One must have Bajaj Financial Service EMI Card.
  • If you have credit card then they will offer you lesser interest rate (Not disclosed how much lesser as he found me asking so many questions without zeroing on the mobile phone I am planning to purchase).
  • Offer explained to me with an example as… Suppose you planned to buy Rs.10, 000 valued mobile phones then initially you need to pay first month instalment i.e. Rs.1, 000 (because the loan tenure is 10 months) +Rs. 750 as processing fees. So initially I need to pay Rs.1, 750 and for the next 9 months it will be monthly Rs.1, 000 only!!!

Legality of this offer–

Previous year RBI banned such loan offers which claim to be ZERO percent interest. Because such zero percent loan not at all exist. In return, lenders used to collect higher interest rates in the name of processing fees. This deal for many of us looks like a great offer. However, in reality it is nothing but one type of paying your interest in advance for your loan. Therefore, this is nothing but a scheme to allure customers as if they are offering you the product at cheap zero percent interest.

So how much it really cost you?

Before understanding how much it costs you, first let us understand the concept of APR or Annual Percentage Rate. Usually when you apply for a loan, along with interest rate lenders also charges some fees which are non refundable. The loan APR considers these costs along with an interest rate and will give you an exact cost of loan on annual base.

So the loan APR actually provides you the cost of your loan in terms of percentage on yearly base. When we consider above example, like I am planning to buy Rs.10, 000 mobile phones and for that initially I am paying Rs.1, 000 (First EMI) +Rs. 750 (Processing Fee). Then for the next 9 months I will be paying Rs.1, 000 monthly. When we calculate the Annual Percentage Rate of this, then this ZERO PERCENT LOAN will actually cost me 19.58% per year. You too can play with calculator by visiting HERE.

APR

RBI banned the zero percentage EMI scheme. However, few shops offer you with different name but with the same concept, which is called ZERO PERCENTAGE. Whatever may be named, whether it is EMI or UMI, concept of loan is same and features differ to attract customers. Hope you do your homework before falling into such traps.

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About Basavaraj Tonagatti

Basavaraj Tonagatti is the man behind this blog. He is SEBI Registered Investment Adviser who is practicing Fee-Only Financial Planning Process and also an Independent Certified Financial Planner (CFP), engaged in blogging since 7 years. BasuNivesh blog is ranked as one among India's Top 10 Personal Finance Blog. He is not associated with any Financial product/service provider. The purpose of this blog is to "Spread personal finance awareness and make them to take informed financial decisions." Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. These should not be construed as investment advice or legal opinion."

Reader Interactions

Comments

  1. Mythili

    Hi, am Mythili from KK Nagar. I want to buy Redmi mobile. But my salary is 15K only. So how can I buy the mobile in EMI

    Reply

  3. Thangam

    I want to buy samsung galaxy j7 but in dont have credit card and bajaj card also please help how i can buy thru emi

    Reply

    • Basavaraj Tonagatti

      Archana-Anything that is called buying through EMI is totally BAD. EMI meant for profit to lender (Bank) but not YOU. Accumulate amount then buy it that too only if it is necessary. Electronic goods are not assets but liability.

      Reply

    • Basavaraj Tonagatti

      Udayakumar-There are always lenders ready of they find a suitable eligible candidate. So don’t bother about that. Instead, check why you need this mobile, whether it is need or want and your financial condition.

      Reply

  16. Avinash

    We talk or compare the Rates of Interest in various schemes, but what is applicable definition for that Rate of Interest ? Interest rates cane be (1) Flat Rate (2) Simple rate of interest (3) Daily,Monthly,Quarterly or Half-yearly compoundable (4) Reducing balance rate and Zero Rate of Interest as explained. Why these are not defined with ” short IDs ” so that investor is not confused, rather be-fooled with these figures ?

    Reply

  17. harish

    hi am planning to buy iphone 5s gold 16 gb and apple macpro laptop how much should i pay in first month can help me bro…… my contact no 8892853698

    Reply

  18. Bharati

    HI Basavaraj,

    I brought a mobile online thru Credit Card EMI- 6 Months. Mobile price-6000/-. EMI Amt: 1035/-.
    Totally 212/- extra for 6 months. No other charges.
    I feel this is good deal to buy and with less interest.What you say about this…

    Reply

    • Basavaraj Tonagatti

      Bharati-Do you feel Rs.212 have no value? You visited the site link of calculator which I provided above? It shows the interest rate of around 14%. Do you feel getting loan at 14% is cheaper to you? Think twice to your investment also. It is hard to get 14% return for such short tenure but you are ready to make your Credit Card Bank richer at 14%. Strange na??

      Reply

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