Understanding Mobile Phone EMI: What You Need to Know Before You Buy
Mobile phones have become an essential part of our lives. With the increasing demand for smartphones, there are numerous models available for customers to choose from. However, while purchasing a mobile phone, many customers face difficulty in understanding the concept of EMI or Equated Monthly Installment. In this blog post, we will give you a thorough understanding of what EMI is and what you need to know before buying a mobile phone on EMI.
What is EMI?
EMI stands for Equated Monthly Installment. It is the fixed amount that a customer has to pay to the lender every month until the loan (in this case, the mobile phone purchase) is fully paid off. EMIs are usually inclusive of the principal amount borrowed and the interest charged on that amount.
How Does EMI Work?
EMI is calculated using different factors such as the interest rate, loan amount, and tenure. The interest rate is the rate at which the lender charges interest on the loan. It is usually calculated as a percentage of the loan amount. The loan amount is the amount borrowed to purchase the mobile phone, and the tenure is the duration of the loan.
The EMI for a mobile phone purchase is calculated using a formula that takes into account the factors mentioned above. The formula is as follows:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
where P is the loan amount, R is the interest rate, and N is the tenure in months.
For example, if you want to purchase a mobile phone worth Rs. 20,000 and the interest rate is 12%, and the tenure is 12 months, the EMI calculation will look like this:
EMI = [20,000 x 0.01 x (1+0.01)^12]/[(1+0.01)^12-1] = Rs. 1,776.51
What Do You Need to Know Before Buying A Mobile Phone On EMI?
Before purchasing a mobile phone on EMI, you should consider the following factors:
Interest Rate:
The interest rate is one of the essential factors you should consider before purchasing a mobile phone on EMI. It affects the EMI amount that you will have to pay every month. You should check the interest rate offered by different lenders, compare them, and choose the one that is the most suitable for you.
Tenure:
The tenure is the duration of the loan, i.e., the number of months that you will have to pay the EMI. You should choose a tenure that allows you to comfortably repay the loan without financial stress. Longer tenures reduce the monthly EMI amount, but you end up paying more interest in the long run.
Loan Amount:
The loan amount is the amount that you borrow to purchase the mobile phone. You should always borrow an amount that you can comfortably repay every month. Borrowing an amount that is too large for your income can lead to financial stress and negatively impact your credit score.
Conclusion
In conclusion, understanding EMI is essential before purchasing a mobile phone on EMI. The interest rate, tenure, and loan amount are some of the critical factors that you should consider. You should choose a plan that is affordable, comfortable, and suitable for your needs. By considering these factors, you can make an informed decision and save yourself from future financial stress.
