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EMIs may offer easy purchases, but without planning, they can trap you in debt. Know when EMI helps, and when it silently drains your savings and peace of mind
EMI can be a helpful tool if used wisely, such as for emergencies, essential home appliances, or investment-driven purchases like education or housing. (News18)
We’re all familiar with the word EMI — Equated Monthly Instalments. In today’s fast-paced world, it’s become incredibly easy to buy just about anything through EMI. Be it a phone, flight tickets, or even a refrigerator, if it’s available on EMI, chances are someone’s already swiping for it. But is it really a smart choice?
What Is EMI And Why Is It So Popular?
EMI allows consumers to purchase items and pay for them in smaller monthly amounts, usually with added interest. It offers convenience and flexibility, making expensive items seem more affordable.
You no longer need a lump sum; a few clicks and a signature are enough to own something today and pay for it tomorrow.
The Hidden Cost Of Convenience
While EMI may seem like a blessing, without careful planning, it could lead you straight into debt. You end up paying more than the product’s actual price because of interest.
Over time, these little purchases can snowball into a significant financial burden.
Is EMI Worth It? What The Experts Say
Finance expert Tapas Chakraborty warns against blindly relying on EMI schemes. In a viral post on LinkedIn, he described EMI as “the biggest trap for Indians”, even more dangerous than inflation or tax. The simple formula? “Earn, borrow, repay, repeat. No savings, swipe again.”
What was once meant to ease financial pressure is now becoming a lifestyle choice, and not necessarily a healthy one.
The EMI Trap And India’s Debt Problem
According to Tapas Chakraborty, household debt in India has reached 42% of the GDP. Credit cards, personal loans, and ‘Buy Now, Pay Later’ schemes make up a whopping 32% of this debt.
To put it in perspective, 70% of iPhones sold in India are bought on EMI, and 3 out of every 5 people have more than three active loans.
How To Calculate EMI?
If you’re still considering buying on EMI, it’s vital to understand how it’s calculated. Here’s the standard formula:
EMI = [P × R × (1+R)^N] / [(1+R)^N – 1]
Where:
P = Principal amount
R = Monthly interest rate (Annual rate ÷ 12)
N = Loan tenure in months
Use this formula, or an online EMI calculator, to understand exactly how much you’ll end up paying.
When EMI Makes Sense (And When It Doesn’t)
EMI can be a helpful tool if used wisely, such as for emergencies, essential home appliances, or investment-driven purchases like education or housing.
But buying non-essential luxury items or racking up multiple EMIs without budgeting can quickly become unsustainable.
Final Word: Don’t Let EMI Dictate Your Finances
Next time you see ‘Easy EMI Available’, pause and ask: Do I really need this right now? Being debt-free is the real freedom.
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