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You want a new laptop, a jacket or a new couch? When you buy an installment plan, you can take the goods home there and then, but you do not have to pay the full price right away. You pay the rest later, in installments. It sounds great. But is it really?
What an installment purchase really costs

Five questions to ask before making an instalment

1. Do I really need it?
Long payment terms may result in your having to pay for the purchased article even when you no longer have it. That can be really annoying when it is clothes or a mobile you bought.
2. Do I have to have it right now?
Paying there and then is always cheaper. So save the extra cost that comes with an instalment purchase and buy only when you have saved enough money for the item you want.
3. How much can I afford to pay out in monthly instalments?
Monthly payments may quickly get out of hand and overburden your budget. It’s wise to never have more than two instalment plans running at the same time.
4. How much more will an instalment purchase cost?
Be careful! Interest and fees will be payable when you buy on an instalment plan. There is no such thing as “zero interest & no cost”. Always ask for the effective interest rate per year. Only this will show you how much interest you really have to pay. Usually only the low monthly instalment is mentioned, but the total amount that you have to pay is much more important. Don't forget instalment payments are among the most expensive forms of credit. The Chamber of Labour's bank calculator shows you where the cheapest loans are available
5. What happens if you cannot pay an instalment?
If you get behind with your payments, it may become a costly matter. It’s best to discuss this contingency with the seller before it happens.


And if you are no longer able to pay your debts or instalments, contact the Chamber of Labour or debt counseling.

FAQ

With installment purchases, you can take a product with you immediately, but you don’t have to pay the entire amount at once. Instead, you pay in monthly installments. This sounds practical, but it can be expensive if you don’t consider the additional costs and obligations.
Installment purchases are often associated with interest and fees. Even if “0% interest” is advertised, there may be hidden costs. You may also end up paying for something that you no longer use or own – such as clothing or technology.
Think carefully about how much you have available each month and whether you can pay the installment without any problems – even over a longer period of time. It is advisable to never have more than two installment purchases at the same time so that you don’t lose track.
If you miss an installment, reminder fees, interest on arrears or even legal action may follow. Clarify in advance with the provider what happens in such a case. If you notice that you can no longer pay your installments, contact the Chamber of Labor or debt counseling early on.
Don’t be fooled by low monthly installments. The effective annual interest rate is important – it shows you how much you will pay for the loan in total. The Chamber of Labor’s bank calculator can help you compare cheap offers.

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