By now we’re guessing you’ve already heard of 0% installment plans or maybe even thinking of availing one from your preferred bank. But before you do, let’s run through a quick list of facts to help you understand it better!
And while we’re here, let’s also answer the question in everyone’s heads: are 0% installment plans worth it? Let’s find out.
What are 0% Installment Plans?
Thanks to the popularization of credit cards, installment plans are now one of the most popular payment methods for big-ticket purchases. And it’s easy to see why – installment plans fully embody the “Buy Now, Pay Later” principle of convenience. With it, you can buy a new smartphone, a designer bag, or even home appliances without burning a hole in your wallet.
But what are 0% installment plans? Are they any different from your common installment plans?
For the most part, credit companies charge a fixed interest rate for every transaction made with them. That means that if you avail an installment plan from them, you will have to pay more than the total amount of your purchase.
Why? Well, this is the price of the convenience the “Buy Now, Pay Later” model gives you.
In 0% installment plans, however, credit companies agree to waive ALL interest rates for your installment purchases. Imagine: if you avail a 5k-worth of items using your 0% installment plan, all you have to pay for is the 5k – no more, no less.
What Makes 0% Installment Plans… 0%?
And you’re probably wondering, what’s the catch? What makes 0% installment plans have 0% interest rates in the first place?
And you should be! In our opinion, a wise consumer always makes it a point to look for the catch before diving into any financial decision.
0% installment plans become possible due to several factors set by credit companies.
Here are some factors you should look into:
- Tie-ins with specific merchants – most credit companies partner with specific merchants. This means you have to buy from these merchants to avail of a 0% installment plan.
- A fixed payment durations – you’ll have to complete your payment within a fixed payment duration, say three months, in order to avail of a 0% installment plans. Any longer than that and you can be charged with the normal interest rate.
- Fixed amount of purchase – some credit companies implement limits on the amount of purchase you’ll need in order to avail their 0% installment plans.
Being aware of the many factors behind your installment plan allows you to assess the pros and cons of availing an installment plan and whether it is the best payment option available for the purchase you want.
Should You Avail 0% Installment Plans?
The best way to answer this question is to honestly assess your financial situation and to review your list of priorities.
Take note of your repayment details.
It is important to pay close attention to whether your repayment schedule is monthly or bi-weekly and whether your due dates fit your payday schedule or not. You need to make sure that you won’t be running short of cash just when your due date is coming around the corner.
Take note of how much you will need to pay every due date.
Next, you’ll need to have a clear grasp of how much you will need to be paying and for how long. This is so you can plan your budget ahead of time and make sure that there is enough “space” in your budget to accommodate your installment plan.
Remember to always prioritize your needs over your wants!
Read up and take down notes.
Lastly, we recommend to do your due diligence in reading up and researching on the how’s and why’s of the installment plan you have in mind.
Read up on the application process in advance and prepare any requirements you might need to submit. Look up reviews and testimonials before taking the plunge as this will help you get a feel of the credit company, their processes, and the quality of their customer service.
And should you decide to avail 0% installment plans in the future, make sure you read thoroughly the terms and conditions indicated in your contract before signing anything! Make sure you agree to all the pre-set conditions; otherwise, it is perfectly acceptable to decline the contract.
And there you have it! We hope we were able to shed some light on what 0% installment plans are and how they work. Do you have other questions or clarifications? Hit us up in the comments section down below!