Installment purchase vs. installment loan
You probably know the situation. You search the Internet for a new TV or a new washing machine and after a detailed search, you have finally found the right product and committed to it. However, such a high expenditure is currently difficult to reconcile with your wallet, so you are considering financing the purchase. Online you will immediately be offered the option of installment purchase. A refund in small installments makes sense, but what about the costs?
To answer this question and to show you which financing makes sense for you, the following article, which compares the two types of financing installment purchase or installment loan, will help you. The process to obtain such poor credit loans is simple.
Installment or installment finance is a type of credit that is granted to the consumer after a credit check. The customer pays the financed item in monthly installments. As a rule, the dealer works together with a partner bank so that a loan agreement is created between the partner bank and you as a consumer. Of course, this payment method is not in vain, as with a normal loan for interest. Well pay attention, because usually, the interest rates are significantly higher than with normal consumer loans, often effective interest rates between 10% to 15% pa!
Exceptions to this may be real 0% financing, some of which are offered by traders. In the first step, this sounds tempting for customers, as consumer goods can be purchased at such a low price. But watch out for stars in such offers, the appearance can deceive! Disadvantageous clauses in small print or residual debt insurance can quickly turn a seemingly cheap installment purchase into an expensive proposition.
Another sticking point that you should keep in mind when paying installments is that it is easy to lose track of small payments. The seemingly simple handling quickly leads to further installment financing, which adds up to an unmanageable number of monthly payments. Monthly small installments are overlooked, so that overall more purchases are made than the income actually allowed.
A cheap interest consumer loan can often be a better and cheaper alternative to installment payments. An online loan is also a form of financing. As a rule, an online loan has much better terms and conditions than an installment loan. Among other things, this is due to the fact that consumer loans are better audited in the award process. Online merchants offering installment payments often award them with quick, relatively simple examinations, but in return, they demand significantly higher interest rates. The deciding factor for deciding whether to take out a loan or to finance it with the trader is the total cost of financing.
Ultimately, you should decide on an individual situation, which is the best option. Think carefully about whether you want to finance a consumer good and whether it fits in with your personal financial situation. When you choose to finance, pay close attention to the interest rates and compare them. If you get a real 0% financing with no hidden costs after a thorough exam, this can be an interesting and cheap alternative.
Compare installment purchase vs. installment loan
Otherwise, the following example shows that ordinary installment financing generates significantly higher total costs compared to a normal installment loan. The purchase of installments will increase your costs by € 366.57.
|Giromatch installment loan||payment by installments|
|loan amount||2,500 €||2,500 €|
|Loan term||36 months||36 months|
|Eff. Annual interest or disbursements||2.49% *||11.99% **|
|Monthly Rate||72.11 €||82.29 €|
|interest costs||96.03 €||462.60 €|