What Are the Key Features of an EMI Account?

EMIs (equated monthly instalments) are the linchpin of numerous loan agreements, facilitating systematic debt reduction over a stipulated time frame. They also help improve credit scores and facilitate responsible borrowing.

However, not all EMIs are created equal. Those that are authorised by regulators offer safer and more robust payments solutions for businesses.

1. Flexibility

EMIs (equated monthly instalments) are a convenient way to pay for big-ticket items like cars and houses. They help you buy stuff that might be out of your price range otherwise, and also give you a chance to build up a decent credit score.

Unlike banks, which are regulated by national or federal authorities and typically have brick-and-mortar branches, EMIs are largely digital institutions and can offer a wide range of services including payment and money transfer capabilities. EMIs can also be cheaper to use than traditional banking platforms since they do not have the same level of transaction processing fees.

Moreover, EMIs can offer better flexibility in terms of product development as they do not have the same level of regulatory restrictions. This is why many innovative companies like Shopify have chosen to associate with EMIs as opposed to conventional banks when building their products and services. This is because they can develop innovative financial services more quickly and at a lower cost.

2. Convenience

An EMI account is a great tool for both borrowers and lenders. It allows borrowers to know exactly how much they will need to pay each month, which makes budgeting easier. Meanwhile, the lender gets a predictable and consistent income stream from the loan interest.

EMI accounts can also be used to meet a variety of business needs, from accepting customer payments to making cross-border payments to suppliers. They can even be used by companies operating in high risk industries, where banks are often reluctant to provide them with the payment services they need.

In addition, EMIs often offer lower fees and quicker account opening times than banks. They are also typically able to offer better tech and a more user-friendly customer focus. UK based EMIs, for example, are regulated by the FCA and are required to have robust safeguarding requirements in place. This should give businesses peace of mind that their money is in safe hands. However, it is always worth doing your own due diligence to make sure that the EMI you choose is credible and operates well-documented safeguarding policies.

3. Affordability

The EMI option helps people buy products that are otherwise out of their budget. It allows you to purchase a home, car or even a personal loan without having to pay the entire amount upfront. It also helps you plan your finances as you know exactly how much you have to pay every month.

However, it’s important to note that your ability to pay EMIs depends on several factors, including your gross monthly income, your monthly expenditure and your future prospects (including any changes in your lifestyle). Generally, lenders allow borrowers to take up loans only when their EMI payments don’t exceed 30 – 45% of their monthly income.

This is the advantage of EMIs over banks – they’re more flexible and tend to have a narrower focus, allowing them to quickly adapt to market needs and drive innovation. For instance, many of the new online payment features you’ve probably seen over the last decade were invented by EMIs. They also have a lower cost base compared to banks, which can help reduce their operational costs and enable them to offer better rates on loans.

4. Transparency

The EMI system allows customers to meet a variety of needs with the help of a monthly payment. For example, people can purchase large-ticket items offline and convert them into EMIs using their bank’s app or by calling customer care. Moreover, EMIs can also be used for the repayment of credit card balances.

However, it is important to note that EMIs can lead to a long-term debt trap. This can be avoided by paying back EMIs on time and staying within budget. In addition, people should avoid frivolous spending such as nightclubs, movies, and fine dining.

Finally, EMIs are a useful alternative to traditional banks for people who need quick access to funds. They can also be a good choice for entrepreneurs who want to build innovative financial products in a fast and secure manner. Additionally, EMIs typically offer lower fees and faster account opening than banks. In addition, they are required to comply with FCA regulations and have robust safeguarding requirements in place. This means that they are generally safer than banks, which are regulated by national or federal authorities.

5. Security

EMIs (Electronic Money Institutions) and PIs (Payment Institutions) use safeguarding accounts to keep their customers’ funds separate from the institutions’ own money. This is a regulatory requirement and helps protect consumers from any potential issues that may arise. These accounts are monitored on a daily basis to detect any discrepancies or suspicious activity.

Unlike traditional financial service providers, EMIs can offer more streamlined and innovative compliance procedures. This allows them to better serve businesses in a wide range of industries, including high-risk companies that often face routine financial discrimination from more established financial institutions. FinXP, for example, is a Malta-based EMI that specializes in providing payment services to corporate entities operating in niche industries.

Whether you’re looking for a way to finance a new gadget, purchase a home, or cover your monthly expenses, an EMI can be the perfect solution. Just be sure to do your research and shop around to find the best deal. And remember, skipping EMI payments can have significant consequences for your credit score.