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Home appliances on installments or on credit?

There are purchases that no one who has their own apartment can escape. Of course, furniture, household appliances or electronics can be purchased for cash, but not everyone has several thousand dollars on their account. Among the most popular ways to finance such expenses are undoubtedly installment and cash loans. What is the difference and which is worth choosing?

Expenses under control

money

The first major difference between cash and installment loans is its purpose. In the case of the former, we do not need to specify it when taking out a loan. Therefore, the money that we borrow in the bank with the intention of buying a fridge or washing machine can be used, for example, for holidays or electronics.

The installment loan is, however, assigned to a specific product and usually, the money awarded to us by this title bypasses our account and goes straight to the account of the store where the product is purchased. This simplified procedure, however, will not do without collateral, among which the most commonly used by banks are: blank promissory note, blocking funds on the account or misappropriation of purchased goods and services.

The pledge is certainly the most troublesome for the bank because, in the event of non-payment of installments, it is possible to sell the goods only in court enforcement proceedings. Blocking funds is the riskiest for the client because it limits his control over expenses.

As long as better?

As long as better?

The longer we repay the loan, the higher the interest rate and the higher the total costs of servicing it, but this cannot be considered a rule without exceptions. However, some customers want to spread the expenditure over the longest possible time. The banks’ offer for installment loans usually covers up to 36 months.

Similarly, the difference will be in the maximum loan amount. In the case of installment loans, it oscillates on average around 30-35 thousand. USD, 0% installments? Although interest-bearing credit advertisements attack us from all sides of home appliances and electronics, we must look critically at them and carefully examine the contract before signing. 

In fact, only large retail chains can afford

bank

Absolute 0% “and this only as part of short promotional campaigns. In other cases, we usually deal with zero interest only on the first or the first few installments of the loan, while the rest we have to pay standard interest.

Another treatment used by shops and banks is compensating for the lack of interest with required insurance against getting sick or losing a job, or a high commission for granting a loan also called a preparation fee or a fee for granting a loan, so as not to use the word “commission”. As a result, it may turn out that by opting for an installment loan we agree to a higher APRC than in the case of a cash loan.

Comparison of nominal interest rates on installment and cash loans in selected banks (amount: USD 10,000, purpose: household appliances worth USD 10,000, loan period: 24 months)

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