Purchase by installment may seem very interesting when you are shopping. That new big TV, a new wardrobe or a new laptop. You can’t actually pay for it, but the store offers the possibility to purchase on credit! Unfortunately, this option is not as nice as it seems. Purchase by installment is also a special form of loan and a form that lenders often earn extra money from.
In some cases, it is the store itself that acts as the lender. However, it also happens that an existing lender is used to offer installment purchase. In that case, the lender pays the amount of your purchase to the retailer and the amount is then reimbursed in a fixed number of installments.
In the Netherlands, an installment purchase does not have to be recorded in writing, unlike most forms of loans. In Belgium, it is legally required to record an installment purchase in writing. In addition, 15 percent of the purchase amount must be paid in cash at the time of purchase.
The very highest interest!
Of course you would like a new large TV or a new wardrobe. Retailers and lenders know this too. That is why it often seems so interesting to be able to buy the product now and to be able to pay for it in parts. However, often more money is earned on an installment purchase than on a regular loan. This means that in most cases the interest you pay when buying on installment is higher than with other forms of borrowing money.
For this loan also applies that you have no collateral. You immediately become the owner of the product you purchase and without collateral there is a risk that the retailer will be left empty handed if you cannot pay the bill back. For this reason an extra high interest is often charged. The most important advantage of buying on installment is that you can immediately access the product, while you may not actually have the money for it at the moment. However, in almost all cases you are better off with another form of loan, such as a personal loan or revolving credit.