Purchase on installment = Borrow with a high interest rate

“Buy now, pay later!” It cannot be missed if you see that slogan regularly appear. Sounds attractive, right? Especially with a large edition such as furniture or a television, or if you are short of cash. But how wise is it to make your purchases this way? Buying on installment is simply borrowing money.

What is the installment purchase?

bank

Purchase by installment means that you do not immediately have to pay in full for a purchase. You repay the purchase price in installments. In the meantime, you can already enjoy your new television, couch or car.

Particularly with large expenditures, staggering or paying later is popular. But this option is also often offered online.

Expensive form of borrowing

By making your purchases on installment you can postpone payment. That might be useful if your purchase is necessary and your salary only comes in a few days.

But the benefits stop there. As mentioned, installment buying is basically just borrowing money. A very expensive form of borrowing even! You usually pay the maximum interest for this loan.

A loan with maximum interest

Since 1 January 2015, the legally permitted maximum interest rate has been 14 percent. You understand, with such an interest rate your purchase amount increases quickly. Just a calculation example.

Suppose you buy a television for 500 dollars. If you agree to pay that 500 dollars later at a 14 percent interest rate, you will pay an additional 70 dollars for your television. In total, your purchase costs 570 dollars. Sin! There are cheaper alternatives.

Saving or normal loan

Saving or normal loan

Saving money for your purchase naturally remains the cheapest way. It is wise to ensure that you always have some money in mind for unexpected expenses. Or postpone your purchase and save the amount together.

Can the purchase really not wait? Then opt for a normal loan instead of buying on installment. For example, you already have a continuous Good Finance from 4.5 percent interest. That is a difference of almost 10 percent!

Request a loan quote

Want to know more about concluding a continuous Good Finance? Request a quote and receive a suitable proposal within 24 hours. We are happy to help you find the loan that suits you, guaranteed at a lower interest rate than the aforementioned 14 percent. So you can do fun things with your money.

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