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What is the difference between an installment plan and a loan when buying goods in a store
If you use the service of installment payments when buying a product, you definitely need to find out how it differs from a loan. It’s worth finding out if you really won’t overpay.
What is the difference between an installment plan and a loan for a product bought in a store
Installment plan involves the purchase of equipment or other expensive items with a deferred payment schedule without paying interest. This payment method is different from an interest-free loan.
Before you sign an agreement, you need to know how an installment plan differs from a loan
The main differences are as follows:
- if you purchase an item by installments, only the seller and the buyer appear in the purchase agreement. There are no third parties. If you need to arrange an installment plan through a bank, then we are talking about a loan;
- information about a purchase with a deferred payment schedule does not go to the Credit Bureau. If you do not cope with the payment, then the banks will not know about it;
- Unlike a loan, there is no commission or interest when payments are deferred, but there may be penalties for late repayment of the amount.
It is not a fact that by taking out an installment plan, you will receive financial benefits. Usually, the service is provided only for promotional offers, which have a discount of up to 40%. But such an offer is canceled if payments are deferred. If you are unable to make a purchase with cash, you will be forced to pay the full amount.
Potential risks and benefits when buying in installments
There is no term “installment plan” in the legislative framework. It is used for advertising purposes to attract buyers.
An installment purchase transaction is governed by the Civil Code. Therefore, if you find any additional obligations in the signed sales contract, you will have to defend your interests in court. When applying for a loan through a bank, all financial relations are regulated by the Bank of Russia. In this case, your risks are reduced.
When purchasing things in installments, carefully read the terms and conditions specified in the contract. It is a legally significant document
The purchase and sale agreement must contain a clause that spells out the financial relationship in the event of the acquisition of a defective item.
When selling in installments, the seller bears the greatest risks, since the buyer may not deposit money in the required period.
In fact, an installment plan is the same loan, only without repayment of interest. The seller concludes a profitable deal with the bank, so he can provide the buyer with a discount in the amount of interest on the loan.