Sometimes the only way to buy an expensive item is to use a bank loan service. And already many consumers have experienced the pros and cons of this procedure. Recently, however, more and more stores offer to purchase goods from them in installments. At first glance, it seems that there is no fundamental difference, but is it so?
- Payment by installments is a method of purchasing goods, in which the buyer is given the right to pay for the purchase in equal installments with a certain period of time.
- Bank loan - an amount that a bank lends to a client to buy goods for temporary use at a certain percentage.
It turns out that the first difference in terms is the presence of interest payments to the bank for the provision of a loan service. But the difference lies not only in this, so we will consider in more detail each type of transaction.
What is an installment plan and what are its features
In accordance with the Civil Code, an installment plan is a transaction in which special payment conditions are determined, namely, the purchase amount is divided into several payments and postponed for a certain time. In this case, the product or service is provided to the client upon completion of the transaction. Features of the installment plan:
- Any product can be the subject of a contract, but most often it is expensive property.
- The sale of goods by installments does not imply any additional charges. However, the seller may slightly increase the value of the product in case of inflation.
- The terms of the transaction are negotiated between the seller and the buyer and can be changed by common agreement after the conclusion of the contract.
- Buying goods in this way involves making an initial payment of 20-30% of the purchase amount.
To protect the interests of the parties to the transaction, an official document is used - an installment agreement. In addition to the terms and conditions of the refund, it also describes other aspects of the transaction. For example, the procedure for returning goods if a defect is found in the product. There are no legal requirements for this type of relationship, and it is more in the interests of the seller, since the buyer in this case does not risk anything. Installment agreement terms:
- At the conclusion of the transaction, the pledge will be the goods purchased under the contract.
- Until the moment the client pays the last amount of the debt, he is the user, not the owner of the purchased property.
- If by the specified date the debt is not repaid or the interim payments have ceased, the seller may withdraw the item.
- If payments stopped after more than 50% of the total cost was deposited, then the parties decide among themselves how exactly the remaining amount of debt will be returned.
Another important point to be aware of is that the installment agreement is regulated only by the Civil Code. And if after a while the seller announces new requirements under the contract, then it will be possible to defend one's interests only in court. This is the main difference from loan agreements, which are regulated by the Bank of Russia. That is why it is important to know what an installment plan is and how it differs from a loan.
What do you need for an installment plan? The seller has the right to independently determine the conditions for the provision of installments to the buyer. Therefore, in one case, it is enough to present only a passport, and in the other it is necessary to prepare a whole list of documents confirming the decency and reliability of the client. The most common set of documents includes a certificate from the place of work and a personal income tax certificate confirming solvency.
Features of a bank loan
Usually banks are interested in issuing loans, since it is this service that brings them the main profit. Depending on the intended purpose, the most demanded types of loans are distinguished:
- to purchase a car;
- for business development;
- mortgage;
- consumer.
When it comes to large amounts, the financial institution requires the borrower to collateral in the form of real estate, a car or other valuable items. This step minimizes the risks of the banking organization. When applying for a consumer loan, the bank becomes a link between the seller and the buyer, providing money for making a purchase. Such an operation is interesting for all three parties to the transaction: the buyer receives the desired product, the seller receives money for the sale, and the bank receives a commission for using the loan.
The only drawback for the client is the need to pay monthly interest, as a result of which the final purchase price will significantly exceed the amount declared in the store. However, in this case, the transaction remains transparent, and all calculations can be read in the loan agreement.
Important! Employees of any bank can make a preliminary calculation of monthly loan payments. Thanks to this service, the client can consider the profitability of the transaction and compare with the conditions of other banks.
Features of concluding an agreement with a bank
To obtain a loan, the client must provide the bank with a list of documents that are checked for several days before the lender makes a final decision. The amount of monthly installments is strictly fixed and tied to a specific date of the month until which payment must be made. If one of these conditions is violated, then the borrower will be charged with penalties.
The agreement with the bank specifies the interest rate, the timing of the return of funds, penalties for non-compliance with the terms of the agreement, the rights and obligations of the parties involved in the transaction. According to the agreement, the client is assigned the status of a borrower, and information about his reliability goes to the Bureau of Credit Histories. If the client does not make payments within the agreed time frame, this is reflected in his credit history, and in the future he may be denied a new loan.
It is very important, after paying off all the debt, to close the loan and get a document confirming this fact. Otherwise, even a small amount of debt can turn into a huge fine over time.
Pros and cons of an installment plan versus a loan
When talking about buying goods on credit or by installments, it is important to study the features of each type of transaction and choose more acceptable conditions for yourself. Advantages of the installment plan:
- No interest charges for using the loan. This is often the main criterion in choosing between a loan or an installment plan. However, you need to carefully read the terms of the contract for other expenses: insurance or commission upon receipt of the goods.
- Speed and ease of registration. The transaction is concluded directly between the seller and the buyer without involving an intermediary in the form of a bank. In this case, the buyer usually only needs to present a passport. The conclusion of an agreement with a bank involves the collection and preparation of documents, the creation of an application, and waiting for the bank's decision.
- The possibility of obtaining a loan even with a bad credit history. In the store, the conscientiousness and solvency of the buyer is rarely checked. In the case of a bank, an unpaid loan on time may become the basis for refusal to issue a loan.
- Possibility of replacement or return to the store. In this case, the seller can quickly return the money paid for the purchase to the buyer.
The disadvantages of the installment plan include:
- Making an initial payment as an advance. In the case of a loan, the initial payment is paid only in the case of a major purchase - a car or real estate. With ordinary consumer loans, you can take out a loan for the entire value of the goods.
- Short terms of debt repayment. The maximum installment period usually does not exceed one year. Under the loan agreement, the total amount can be repaid for about 3 or 5 years.
- Hidden tricks that increase the cost of goods purchased in installments.
It is difficult to judge which is better - an installment plan or a loan, since everyone chooses convenient conditions for themselves. However, in order to make the right decision, you need to study the issue even deeper.
What you need to know about installments
How is an installment plan different from a credit in a store? First of all, the legal registration of the relationship between the seller and the buyer. If in the first case the buyer concludes an agreement only with the seller and on his terms, then in the second case an agreement is concluded with the bank.
The installment plan attracts buyers, first of all, by the absence of interest charges for using the loan. There is a sense of savings with a deferred payment. In fact, what sellers promise is not always true. And under the guise of an installment plan, a loan familiar to everyone is often issued. A real installment plan with a deferred payment is an extremely rare occurrence. Therefore, you need to carefully review the terms of purchase or the price offer of the store.
Example. Installment is provided during promotional discounts for goods in the store. At the same time, there is a disclaimer that the discount does not apply when buying in installments. It turns out that it is more profitable to buy goods for cash, and hidden interest is already included in the cost of goods bought in installments.
By the way, the amount of the overpayment is not controlled by anyone, unlike a bank loan, the interest of which does not exceed the maximum interest rate set by the Bank of Russia.
Bank installments
While banks are not legally allowed to provide a pure installment service, more and more advertisements with such offers can be seen. They describe the terms of bank installments with zero prepayment and no interest rate. Moreover, the maturity of the debt may be longer than in the store.
After consulting a bank employee, there are no doubts about the veracity of the information, and there are no additional payments either. However, in reality, this is the same loan, only in this case the interest is paid not by the client, but by the store, which most likely has already invested this amount in the cost of the goods. It turns out that in any case, the client bears the costs, no matter how beautifully this fact is veiled.
In this way, the store increases its sales, because it is easier to sell goods in installments than at full price. In this case, the bank will also not miss the opportunity to earn money, and may try to sell expensive insurance to the client.
How to distinguish a loan from an installment plan
Often there are situations when banks, wishing to attract new customers, offer the store an agreement: the seller provides the buyer with a discount on the goods, along with an offer to get a profitable loan from the bank. Later, the discount is offset by the interest paid on the loan. But in conditions of an unstable economic situation, people tend to look for more favorable conditions and they resort to the installment plan service. In fact, banks can issue a regular loan under the guise of an installment plan. And even knowing well what an installment plan means; at first glance, it can be difficult to distinguish it. How to determine a loan issued under the guise of an installment plan:
- A bank employee takes part in the execution of the contract, and the bank acts as an intermediary for the operation.
- Instead of the standard installment plan, the store offers more flexible repayment periods - from a year or more.
- The seller insistently offers to get a credit card, which clearly indicates the intention to get a loan.
- As a result of calculations, additional payments or commissions are added to the installment amount.
Based on this, we can once again conclude that the installment plan is an agreement only between the store and the client, no intermediaries and third parties should be involved. After splitting into payments, the original purchase amount remains the same, there are no commissions and additional payments.
