Many people prefer to live on credit today. Banks and financial organizations offer citizens a variety of loan products, and shops are ready to provide installments for almost all goods. However, not everyone knows the difference between a loan and an installment plan.
Acquisition of goods and services on credit has become one of the hallmarks of modern life. Today, few people prefer to save money for a long time, because it is much easier to go to the store and take the thing you like on credit or in installments.
Installment: easy and convenient
The mechanism of the installment plan provided directly by the store is quite simple. Its main advantage is transparency and the absence of additional conditions. Inexpensive furniture, household appliances, mobile phones are usually purchased in installments. The buyer chooses a product and pays part of its cost. The rest of the money is deposited in equal installments to the store's account over a certain period of time.
If the buyer has stopped paying the fees, the store has the right to take the goods back, unless the buyer has already paid more than half of the cost for it. However, usually the store prefers not to seize the goods taken in installments, but to collect the rest of the money in other ways.
Credit: affordable and serious
Credit for goods is provided not by a retail network, but by a bank, therefore, the purchase of goods on such conditions is accompanied by the conclusion of a loan agreement. It indicates all the essential parameters of the loan (amount, interest rate, repayment period), as well as the features of its servicing and repayment. If an expensive product is taken on credit, for example, a car, a pledge agreement is usually drawn up for it.
Monthly loan payments are deposited into a bank account. If the repayment of interest and principal is terminated for any reason, the credit institution begins to charge penalties and fines, while taking all available measures to collect the debt.
What to prefer: installment plan or credit?
An installment plan is a commercial loan, and a loan at a point of sale is a target or consumer loan. In fact, the difference between them lies only in the total cost of the loan and in the terms of its repayment.
A lower or zero interest rate and a minimum number of documents for processing speaks in favor of an installment plan, a higher amount and a longer borrowing period are in favor of a loan. A thoughtful comparison of these parameters and the total cost of the goods, taking into account all possible overpayments, will make it possible to make the right choice between a loan and an installment plan.
