What to do if there isn’t sufficient cash for the essential buy? In this situation, you don’t need to stand by, and you can get what you need right away just by getting some money in instalments or loans and paying for it later. Although these financial instruments solve the same problem, they work differently. Let’s see how they differ in the article by the certified credit counsellor.
How do instalments work?
Instalments are the possibility of paying for a product or service in small parts. By buying in Instalments, the consumer for a predetermined time pays the cost of the goods without additional markup. It is convenient for buyers who do not want to overpay for purchases on credit.
Consumer loan
Consumer credit works differently according to the certified credit counsellor. If you do not have enough money to buy, you can go to the bank, and it will give out the necessary amount at interest.
Then within the agreed period, you need to return the amount of the debt & the interest established by the contract for the use of the loan.
What is more profitable according to certified credit counsellor?
Both consumer credit and Instalments solve the same problem of lack of money. At the same time, each of these financial instruments has both advantages & disadvantages.
- When selling goods in Instalments, stores often impose the purchase of related products and additional services. It can negate the main advantage of Instalments: the absence of overpayment. Therefore, before making Instalments, you need to weigh all the pros and cons well.
- According to the certified credit counsellor, when applying for a consumer loan, there is always a risk of taking more money.
- Both credit and Instalments require firm financial discipline. Although Instalments do not imply overpayment for the goods, if you miss making the next payment, this may entail fines.
- Both a consumer loan in a bank and an instalment plan issued in a store affect your credit history and increase the debt burden level. If you plan to issue a mortgage or a loan for a large amount shortly after buying in Instalments, the chances of approval of the application may decrease.
When choosing between a loan and Instalments, you need to compare the conditions for granting a deferred payment and calculate the overpayment in each case. However, in general, there is a simple rule: the higher the price of the goods, the more likely it is that it is faster, more profitable, and easier to issue a consumer loan in a bank. So you will have more freedom in relations with the store. And according to the certified credit counsellor, you will be able to choose the goods at the most favourable price without paying attention to the terms and conditions of Instalments.
If we are talking about a relatively inexpensive purchase, then Instalments will cope with it: it is easier to arrange it on the spot than to look for a suitable loan offer from the bank.