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It’s 12.30 am, and I surf on Netflix and start watching Vantage Point. A classic pop-corn movie but with an exciting premise. 

It shows a presidential killing but from the vantage point of eight different people. A bystander, the assassin, the police offer, the medic etc.  I realized as I watched it remembered a  brilliant post by Prof. Bakshi on about analyzing an investment opportunity from vantage points of various people.

It triggered the idea that why not use the same way to look at the topic of this weeks post.

So you have a seen this advertisement of iPhone and its available on EMI and you are thinking to buy or not to buy.

Lets look from the vantage point of the brand

The brand’s aim is to get you into their fold or if you are an existing user upgrade you. They know that they can influence you to create an irresistible need but it won’t translate into sales unless you have the money or if they are able to make you think that you have money to buy this product. Therefore, they would be ensuring that the product comes with offers and also with an option to buy on EMI.

Features of Buying on EMI

Now let’s look at the Vantage point of Marketing teams giving you these EMI offers

Well, they gotta hit the numbers of people spending money on cards! That is what is their incentive. 

And hence their goal often is to make the process of buying on EMI as smooth as possible.  Also, all of them are competing with each other means that they will try to make the terms as attractive as possible.

So, if you are a credit cardholder or have a good credit score expect sweet deals always coming towards you.

They don’t really care if you need something or not so when you look at these offers know that the sole purpose is to make you buy them.

Vantage point of the store/ e-commerce player offering you EMI option.

Since a lot of shopping, today happens online its imperative to look at their viewpoint.

Their single objective is that you purchase and purchase now.  Unlike brands whose objective is longer one e-commerce players are focussed on instant gratification!
For the store or e-commerce players is doesn’t really matter if you bought a phone just 6 months ago. As long as your interested they will try to make things lucrative for you.
Remember they have spent a lot of money on marketing to bring you to check out page. At that page the last thing they want is consumer dropping off due to lack of money or poor experience.

Therefore,  the will break the purchase into smaller monthly outflows which ensure that everything looks manageable. They will also ensure that there are multiple options so that you are able to find an option which suits you.

Vantage Point of Risk Teams

But in this whole system, there is a team to balance things. That is the credit or risk team in banks. Their job is to ensure that only the good guys get these EMI options. 

And they do this by looking at past data to predict if a borrower will mess things up.  

If you are getting an offer to buy on EMI especially then they are assuming all will be good for you. However, the interest rates they charge will tell you what is their thinking on the risk you run. Any time they charge a rate of more than 15% you can assume that there is a higher chance of you defaulting in their view.

However, No Cost EMI is a very different beast. Here the brand and the e-commerce player pay the banks interest instead of you paying it. So often, you might think that if an offer is available for you that you are a low-risk borrower. In reality, you might be high risk but just that risk on your behalf is being taken by the brand.

Vantage point of your self.

Actually your vantage point is a sum total of what you see and how others influence you. In case of buying EMI”s online broadly, the system is designed to make you buy things.  

That coupled with our innate desire for new things makes buying things on EMI an irresistible thing to do.

How do we counter this?  Simply look at the motives of each one of the above. You would look at them realise whether you really need that product or are you being made to believe that you need this.
EMI”s are a very powerful tool. For maximizing benefit of this tool think if

  • You really need this thing, 
  • while this EMI”s look small is it adding up with existing ones to make a big dent in your income.
  • How much extra interest you might pay.

Before going do check our blog on how these EMI’s and loans can be mis-sold


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