How Does Zero Cost EMI work?
What is the catch here? How do Companies involved make money here?
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The catch is - it is more to do with marketing and sales than finance.
Samsung will cut out a deal with Bajaj Finance. It will provide a 5% discount to Bajaj Fin. So Bajaj Fin will pay Samsung Rs.9500 while it will receive 10k from the customer
Here comes the Cash Flow Wizardry:
As months pass by, Bajaj receives EMIs, the outstanding amount decreases and so does the interest on it. It deploys these EMIs to give another loan and so on. On annualized basis, it earns 19.44% !!