Trap of EMI: The Illusion of Richness

In today’s world everything is available on EMI except food.

If you want to upgrade you mobile with the latest 1.5 lakh iPhone by paying full amount, you will think ten times, but when you see that I can take it just by paying 36 Months EMI of ₹ 4999/-, it looks easy and quite affordable.

EMIs, no-cost offers, and BNPL (Buy Now and Pay Later) schemes make spending feel painless — until your bank balance tells another story.

Nowadays, many of the electronic gadget ads, even for cars and homes, don’t mention the full price but highlight only the monthly EMI amount, so that buyers have the feeling of affordability. But that’s the illusion: these easy payment plans often don’t make things more affordable — they make you feel like they are.

Let’s understand how this illusion of affordability quietly erodes financial health — and what we should do to come out of it.

Understand the Psychology:

Generally, humans don’t think in totals; they feel in monthly bits as the income comes on a monthly basis. Tell someone a laptop costs ₹1,20,000, and they hesitate. Tell them it's just ₹3,999/month for 36 months, and suddenly it feels manageable.

This happens because of a cognitive bias called “present bias” — the tendency to value immediate comfort over long-term financial health. Add the seductive word “zero-interest EMI”, and people will just grab it.

Let’s take an example of a normal working person’s cash flow in today’s world:

Sachin, a 30-year-old IT Guy working in Pune, gets ₹ 70,000 Monthly, but is actually short of money by the end of the month. Let’s understand his cashflows:

₹2,599/month for mobile EMI

₹999/month for Netflix

₹3,499/month for gym subscription

₹899/month for Spotify family plan

₹5,000/month BNPL on laptop

₹2,500/month credit card minimum payment

Apart from that, there is home rent, foods, travelling etc., which are necessities.

If we look individually, above cash flows does not look like a big deal; but, taken together, there is ₹15,496 monthly outgo on these items, more than 22% of his monthly salary. He is not living luxuriously — just leaking cash monthly.

 

Let’s understand the reality:

There is no free lunch. Even the zero interest EMI’s have cost. They remove your upfront discount (inflating the base price) and include hidden processing fees or insurance etc. They are generally offered through specific credit cards that charge renewal fees.

That ₹50,000 Laptop you bought on “no-cost EMI”? Actually may cost ₹55,000 over time — plus, you lost the ₹4,000 cash discount you’d have got if you paid in full.

We must know that every EMI, BNPL, or revolving credit adds to your credit exposure.

High utilisation = lower credit score = higher future interest rates.

So ironically, buying “affordably” today can make your future credit more expensive.

 

Monthly Subscriptions: Do we really need all that...?

This is another sleeping cash flow that happens without even realising it. We subscribe so many things, without really using them. Like...

Food delivery premium plans

Multiple OTTs

Fitness apps

Cloud storage subscriptions

E-learning platforms...and so on...

 

Many of them we subscribe to on auto-renewal mode...so without realising and even using, we are paying for them...

A recent RBI & Fintech study says, more than half of Gen Z Indians are “income-poor, credit-rich” — they are earning decent salaries but committing most of it to EMIs. The average digital consumer in Tier 1 cities holds 3 to 5 monthly EMIs/subscriptions.

 

So what is the way out?

First, use delay gratification tactic, wait for 30 days before buying anything; this waiting time will make you realise whether you actually need it and also give you time to save some money for it. If you still want it — and can afford it in full — go for it.

Secondly, before buying, check: What is the total amount that I will pay over time?

Compare it if you pay the full amount after cash discount and other things. This will give clarity on how much extra you would be paying if you buy it on EMI. Limit your EMIs to 40% of total income

Thirdly, check auto-renewals of subscriptions, and discontinue those that are not used often.

 

And Finally:

Affordability doesn’t mean whether you can buy today by paying a small amount — it’s about whether a purchase fits in future goals and long-term financial planning.  Because the EMIs taken today are a piece of your future income committed today. The more you do that, the less flexibility, freedom, and savings you have. Better to have a financial well-wisher (Advisor) who can guide you for your long-term goals.

So next time when you hear “Only ₹3,499/month!”, pause and introspect, do you really need it? Remember, when it comes to wealth-building, small leaks can also sink big ships.