In our country the installment system is the idea of buying something different. Just like buying with direct money, this is another way of thinking. But, the idea that this is a method of buying goods through credit has not yet reached the people.
Installment is also a loan:
There is no big difference between buying an item, borrowing in one place, and borrowing from the buyer of the item. So overall, we are borrowing.
How the installment is calculated:
Suppose you want to buy an item worth 10,000 rupees. Suppose the company that sells the item for that 10,000 rupees charges 10% interest.
10,000 + 1,000 (interest) = ₹ 11,000
What the shopkeeper will say, you rupee. 1,000 (initial amount. Down Payment in English), take the item. The remaining amount, in 10 installments, is Rs. He will say that he can pay 1000 per cent.
Rs. 11,000 – Rs. 1,000 (initial amount) = Rs. 10000 (left)
Rs. 10000/10 installment = Rs. 1,000 (one installment)
Thus, in installments, we unknowingly and implicitly get stuck in debt. By purchasing the item in installments, we get stuck in a 10% debt. Most of us do not know this. Everything they count, is Rs. The idea is to pay Rs.1000 and get an item worth Rs.10,000 immediately. This is what is called Instant Gratification in English. I.e., immediate satisfaction. This is a very misguided trend.
Disadvantages of buying in installments:
An image is created that we can buy, even what we cannot buy. Psychologically, it motivates someone again to buy things they can not afford.
Stuck in installment debt:
If you plan to sell depreciating items, the loss of money is even greater when buying in installments.
According to the above example, Rs. 10,000 worth of goods, its price due to depreciation is Rs. 9000, Rs. 8000 that the price has been declining. The lower the price, the more money you pay for an item. A few months later, its price was Rs. When it is 6000, if you want to sell it, Rs. Can be sold only after paying 11,000.
Rs. 11,000 – Rs. 6000 = Rs. 5000 (loss)
In case of non-payment,
Rs. 10,000 – Rs. 6,000 = Rs. 4000 (loss)
Therefore, by purchasing depreciated goods in installments, we incur higher monetary losses.
When we buy goods in installments, we lose money on various fees called Initial Processing Fee.
In installments, the interest rate is usually much higher
Failure to pay the installment will result in various stressors due to the compulsion paid by the installment company.
In some installments, even if you pay the price for the item and want to leave, you will lose more money called fines.
How to buy items instead of installments:
If you want to buy something, it is better to save money and buy it. For that, financial planning is essential. For example, Rs. 10,000 per month for purchase of goods. 1000 saved, Rs. After saving 10,000, it is best to buy 10 months later. Instead, Rs. 1000, in a series of savings plans, invested, multiplied by cash, Rs. Good to buy after joining 10,000. Your money, your stuff. No need to tell anyone any answer. No need to touch anyone’s hand.
Exceptions to installments:
Purchasing an item in installments, which lay the foundation for your future, can be purchased in installments.
For example, a tailor I know bought a sewing machine in installments and started a business. For him, there was no cash facility to buy that sewing machine. In his future, that sewing machine will be an asset that will multiply money many times over.
Those who enter the food industry, such as swiggy, zomato, may not have enough money to buy a motorcycle. They also get a job by buying a two-wheeler in installments. To multiply money, a two-wheeler helps.
Unless there are reasons like these, it is best to save money and buy any item. Do not get stuck in installments. It creates the illusion that even things we cannot afford can be bought in installments. That illusion leaves us trapped in a debt trap and makes the future questionable.
Save money and buy things. In installments, we will avoid purchasing items.
