Is No-cost EMI considered as a loan?

Yes, it is treated as a short-term loan and is reflected in your credit report.

How does No-cost EMI affect your credit history and credit score?

If you pay your no-cost EMIs in a timely manner, it can help you build or improve your credit score...

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What is No-cost EMI

No-cost EMI, also known as zero cost EMI. It is a payment option that allows consumers to convert a big-ticket purchase into monthly installments without paying any ‘visible’ interest. It is commonly offered on credit cards or through lenders for products such as electronics and home appliances etc.

How it Works

The purchase amount splits into fixed EMIs over a short tenure (usually 3-9 months)
Interest is included but offset through an upfront discount
The total cost is usually close to the product price
Additional charges like processing fees or GST may apply

No-cost EMI and your credit score

No-cost EMI is treated as a credit facility and is usually reported to credit bureaus (CIBIL, Experian, Equifax and CRIF High Mark). Because of this, whether you pay your EMIs on time or delay, can directly impact your credit history and influences your credit score.

How do No-cost EMI affects your credit score

No-cost EMI can have both positive and negative effects on your credit score, depending entirely on how responsibly you manage your repayments and overall credit usage:

Positive Impacts

Boosts credit score- Paying No-cost EMIs on time consistently builds a strong repayment history, which is a key factor in determining your credit score.
Helps build credit history- For individuals with little or no credit history, No-cost EMI can be a good starting point. Since the tenure is short, it helps you build credit gradually without long-term financial burden.

Negative Impact

Can lower your credit score- Missing or delaying even a single EMI payment can negatively impact your credit score, as repayment behaviour is closely tracked by credit bureaus.
Increases credit utilization- When No-cost EMI is used via a credit card, the purchase amount reduces your available credit limit. High or repeated usage can increase credit utilization, which may negatively affect your credit score if it stays elevated.

Things to consider while choosing No-cost EMI

Check for hidden charges like processing fees or GST
Understand the actual cost and discount structure
Ensure EMIs fit within your monthly budget
No-cost EMI is available only on selected products, so always check eligibility before making a purchase.
Review tenure and repayment terms carefully