4 Important Considerations Before Availing a 0% Installment Plan

There are a few things that may want to consider before availing a 0% installment plan. In this article, we’ll break down the 3 important considerations you’ll need to keep in mind before taking the plunge.

Let’s get started!

 

In the list of popular lies frequently told by 99.99% of the population, “I read and accept the terms and conditions…” is probably up there in the top of the list. And for a good reason! Terms and Conditions are often dull and filled to the brim with indecipherable legal jargon and most of us have better things to do than plow through all that.

But when it comes to your finances and financial transactions, skipping through your Terms and Conditions can have serious implications.

Read: Best Payment Method: cash, credit, debit, or installment plans?

You’ve probably heard of horror stories of hidden fees and charges buried beneath the fine prints of your Terms and Conditions, only to find out about them when it is time to pay your dues.

So before availing a 0% installment plan you’ve been eyeing for your big-ticket purchase, here are three considerations you may want to think about first.

 

Is It Really Interest-Free?

In a world where there is no such thing as a “free lunch”, 0% installment plans should pique not only your curiosity but also your caution. So before eagerly signing that contract, ask yourself: “Is it really interest-free?”

Most credit companies charge a small processing fee for customers availing a 0% installment plan. This can be (preferably) a fixed amount or a small percentage (1-2% is the most common) of your credit limit.

For small purchases, these additional fees may be small enough to be considered negligible. If you are planning on going big with your purchases, however, the fees may also skyrocket.

So read through your Terms and Conditions and take note of any additional fees that you may have to follow when availing a 0% installment plan. Don’t be afraid to bust out your calculator and make your own computations! To get the best bang for your buck, shop around and make comparisons of different terms offered by different credit companies.

Remember, the most important part is you are comfortable with the details presented to you!

 

What are the Parameters?

Perhaps the purchase is only interest-free if availed from the participating merchants. Perhaps 0% installment plans only apply to certain products or services. Or maybe a minimum purchase is necessary in order to avail this payment option. Similarly, there may be instances where the plan is applicable only up to a certain amount of purchase.

Most (if not all) interest-free installment plans also have a fixed payment duration. For instance, some credit companies only allow a maximum of 3 months of repayment when availing a 0% installment from them.

Read: What is Credit Score and Why It Matters

These are all valid parameters for availing a 0% installment plan. And unfortunately, most people don’t pay attention to these details!

 

How Does This Affect Your Monthly Budget?

Much like any other purchase, availing an installment plan, regardless whether it’s interest-free or not, will undoubtedly affect your budget. The money that might go to your other bills or even your savings will be reallocated to paying for your installment plan instead.

So it is important that you have a clear grasp of your budget and whether availing a 0% installment plan at this point will affect it drastically.

Read: How To Construct Your 2018 Budget Plan: A 3-Step Guide

And if it does? There’s no harm in putting your purchases in the “Later” file.

 

Availing a 0% installment plan is a piece of cake nowadays. In fact, you can even apply for one and get results in just one banking day! But in all seriousness, it is easy to get carried away by how fast and convenient it is and forget that it is still a financial decision that needs to be weighed with much thought and care.

Hopefully, with this article, we were able to shed some light on the important considerations before making that decision.

Did we miss anything? Let’s talk in the comments section below!