The latest iPhone is an aspirational product, but it is expensive, starting at ₹79,999 and increasing up to ₹1,59,990. Nowadays, it is simple to obtain a loan to purchase a phone or even pay for a vacation. But the question is, should an aspirational product be purchased on EMI?
We tend to overspend on the latest electronic gadgets in a country like India, where average incomes are low compared to other developed/developing economies. This habit of overspending on electronic equipment is especially prevalent in the younger generation due to lifestyle factors.
Given that the average lifespan of a smartphone is roughly a year, we must wonder whether purchasing a smartphone on EMI is truly a wise move.
We look at the questions that should be considered and perhaps answered before making a decision.
Questions to ask yourself before deciding on EMI options
- Can you afford it: In fact, this is the first question one should ask before purchasing anything, or at least anything that is a want rather than a need. The general idea is that half of your post-tax income should go towards necessities, with the remaining 30% set aside for indulgences or personal preferences. Set aside the remaining 20% for savings and investments to help you achieve your financial goals.
- Your budget: EMI plans can be an excellent method to spread the expense of a new phone, but you must ensure that you can afford the monthly installments. Determine your monthly income and expenses to decide how much you can easily spend on an EMI plan.
- The interest rate: EMI plans generally include interest rates, therefore it’s critical to check the rates given by different lenders before deciding on a plan. An EMI calculator will help you estimate how much interest you’ll pay throughout the life of the loan.
- The loan tenure: The loan tenure is the amount of time you have to repay the loan. Monthly payments will be higher for shorter terms, but you will pay less interest overall. Longer repayment terms will result in lower monthly payments, but you will pay more interest overall.
- Processing fees: For EMI plans, some lenders charge processing fees. Before you choose a plan, make sure to include these costs in your budget.
Why Should You Buy a Mobile on EMI?
Paying full price for a phone can throw your monthly budget off course, leaving you with less money for emergencies. Getting a phone on a debit or credit card EMI, on the other hand, helps ensure you always have enough savings.
With the option of no-cost EMI, purchasing a mobile phone in installments becomes much more appealing. In this manner, you incur no additional costs (0% interest).
Should you go for EMI?
It is not suggested to purchase consumer durables on EMI because the interest rate is greater. It is preferable to save first and then purchase. In most cases, the cost of technological devices, particularly iPhones, decreases over time. It is best not to buy anything if you cannot afford it. If you still want to buy something on EMI, check around for better deals. Look for the lowest interest rate and short tenures to reduce the interest rate even further. If you chose the EMI option, don’t fall behind on your payments because it will harm your credit score.
In an era where marketing mavens build social frenzy around mobile phones, it is critical that we resist the temptation to spend more than we can afford. The money saved should be properly invested in order to achieve more significant and necessary goals.