Advantages and Disadvantages of EMI

Today, we live in a world where it is almost next to impossible to lead a normal life unless you have bank account oozing with cash. Leading a luxurious is far beyond the capabilities of a common man. In such troubled times, EMI seems to be the only savior. EMI an abbreviation for Estimated Monthly Installment, helps you pay for the expensive products you have purchased in parts. However, that’s not the only benefit of having an EMI option. Here are some plus and minus points of EMI.

Advantages:

• Power to Buy- EMI gives you the power to buy items you otherwise would not be able to purchase. EMI has made buying luxurious items an effortless and affordable task for people whose salaries are insufficient to meet their needs. It has made people capable to afford something that is beyond their reach. This type of payment has not only proved to be beneficial for the common man but has also contributed to the success of traders who trade with such expensive products.

• Afford High Priced Items- EMI gives consumers the freedom to afford an item beyond their monetary reach by giving them the option to pay in installments. This proves to be advantageous for them especially when it come to purchasing a home, car or other expensive items like gadgets, home appliances and accessories.

• Pay in Installments- EMI confers users with the liberty to pay a small fixed amount every month. This makes it easy for them to afford daily life commodities without burning a hole in their pockets. Moreover, many banks charge a very minimal charge as interest for most EMI schemes especially for commodities like air conditioner, mobiles and other gadgets. 

Disadvantages: 

• Long Term Debt- EMI is a long term debt as one has to pay the installments till they finish paying off the principal amount. Some loans such as home loans can to be paid for as long as 20 years. In such cases, the user is bound by these loans for a long period of time restricting his freedom to buy other luxurious items. Moreover, the payee ends up paying more than the principal amount he requested for due to the interest rates levied on them.

• May Not Have Early Payment Option- Most banks that propose EMI schemes do not offer an early payment option even if the payee can afford to pay the principal amount early. This can prove to be setback for the payee as he/she will end up paying more than the principal amount due to the interest charges though he has the money to end this process all at once.

• Serious Consequences- Skipping an EMI may lead to various grave consequences like repossession of the purchased item, foreclosure, penalties and strict legal action. Many banks that offer EMI schemes observe strict regulations regarding skipping of EMIs. Consumers are suggested to read the terms and conditions before applying for such schemes to avoid losing the mortgaged item or facing legal actions which will cause more problems.