Buying on installments is in fact a loan that you will pay off at a later date. You buy a product and you have access to it directly. You pay back the costs of this in a number of installments. Buying on installments can sometimes be useful, but it is an expensive form of borrowing money.
What is buying on payment?
“Buy now and pay later”. How often do you not find that cry on the internet if you are looking for a new television, washing machine or laptop, for example? What is buying on payment? That is also called a special form of purchase. This is reported in the Dutch Civil Code (in book 7a ). It says that …
… the buyer acquires ownership of a product on installment and may pay the price in installments.
This form of buying has agreements with hire purchase, with the difference that with lease purchase you are only the owner after paying the last installment.
Why buy now and only pay later?
Why is buying now and paying later or paying in installments so popular? With purchase on installment, a consumer need is met. It is used mainly for larger purchases for which no savings are available. The purchase price does not have to be paid in full at once, but you pay for the purchase in a number of installments.
This can be a godsend for an unexpected expense. Is your washer or dryer suddenly broken? And do you have to wait another month before your salary is transferred? Then you can often buy such a device on an installment online or in a physical store.
Disadvantages of deferred payment
Using buying on payment can also be a pitfall. Often, providers are unclear about the additional costs and the consumer does not realize that there are high interest costs. Buying on credit is simply using a consumer credit. Postponed payment is not free ! On top of the spending amount for that new washer or dryer, you also pay the maximum interest rate of 14%.
Buying car and kitchen on credit is by far the most popular
Buying a car or kitchen on installment seems to be immensely popular. Many kitchen shops and car companies offer this special form of buying. But it is more sensible to take out a personal loan for such expensive purchases. With a personal loan you pay much less interest than with purchase on installment. Every month you transfer a fixed amount to the bank. We call that a monthly installment.
Repayment and interest are processed in these installments. The interest rate does not change during the term. That is why you can borrow for a fixed term. In certain cases, the interest costs of the personal loan are tax deductible. You can read more about this on the website of the tax authorities.
Buy tablet or laptop on installment
With almost all larger retail chains such as Mediamarkt it is possible to pay in installments. Buying a tablet or laptop on installment is also possible. For example, at the Mediamarkt you can request an installment payment for a laptop, tablet or telephone and many other products for amounts from 250 euros. You resolve at least 3% of this monthly.
Buy TV and pay staggered
Because people visit electronics stores less and less often, many web shops from well-known retail chains offer online purchase on payment. You pay off your new television in installments. The Consumers’ Association , however, warns Dutch consumers about this. When buying on installment, you usually pay the seller an interest rate of 14%. Also emerging is the lease of a brand new LED television.
Leasing or renting?
You rent the best television for a fixed amount per month. Whether it’s a 3D TV, a Full HD television or a Curved TV: everything is possible. But whether it is wise, that is the question … Because you will never become the owner of the product. In fact you just rent a new television set.
Buy cheap alternatives for installment:
- Take out a small or large personal loan.
- Open a small credit on a payment account at the bank.
- Close a revolving credit.
- Try to put aside money on a monthly basis for a purchase.
- Consider buying a second-hand product and save money.
- Ask your boss for an advance.