No-cost EMI loans have become increasingly popular, allowing consumers to make high-value purchases without immediate full payment. This "buy now, pay later" model comes with no additional costs, as the retailer or manufacturer usually absorbs the interest. This financial product has revolutionized consumer behavior, encouraged innovative lending practices like Peer-to-Peer (P2P) lending, and benefited both customers and sellers by transforming sales strategies. Consumers can convert their purchases into affordable monthly installments without incurring interest charges, making expensive products more accessible.
Why A Seller Opts For No Cost EMI Loans?
Sellers benefit from no-cost EMI by significantly boosting sales. For example, a customer initially planning to buy a ₹10,000 phone may opt for a ₹20,000 model upon realizing the monthly payment reduces to just a few thousand rupees, with no additional interest liability. This affordability encourages higher-value purchases, increasing the seller's revenue and attracting more customers looking to manage their cash flow effectively while acquiring better products. The increase in sales often outweighs the cost of interest for sellers. The growing uptake of such retail loans boosted outstanding credit card balances by 34% year-on-year to ₹2.4 lakh crore in November 2023.
How Does This Whole Mechanism Work?
A customer walks into a Croma store and buys an Rs. 1,20,000 iPhone 15 Pro, here he opts for Snapmint's 6-month no-cost EMI plan. This decreases the customer's burden to only Rs. 20,000 a month, whose interest liability is borne by Croma.
Let’s understand the mechanism:
Per Annum is Snapmint's lending partner. Here, Per Annum transfers the amount directly to Croma after deducting the interest in advance. At Per Annum, we charge an average of 21% on this no-cost EMI plan. The effective interest amount would be Rs. 8,117.
Hence, Per Annum directly transfers Rs. 1,11,883 to Croma, keeping Rs. 8,117 to itself. The principal amount will be gradually received from the customer at Rs. 20,000 per month. This arrangement ensures Croma gets paid upfront, while the customer enjoys a hassle-free, interest-free payment plan.
How Does This Arrangement Benefit Our Customers?
Per Annum’s sister entity, Lendbox allocates 35-40% of its portfolio towards No Cost EMI loans. As illustrated, Lendbox collects the interest amount upfront during each transaction, significantly minimizing the risk of NPAs. The principal is recovered over the agreed period through monthly payments. This approach ensures stable and predictable returns for our lenders. By focusing on no-cost EMI lending, Per Annum guarantees the interest is secured in advance, enhancing the reliability of your money. Customers benefit from consistent returns and lower risk, making their lending at Per Annum a smart choice to earn higher returns for their financial stability.