Part payment – Advantages and disadvantages compared to private loans
Part payment means paying over a predetermined time the cost of a product. It has become increasingly common for salespeople and stores to offer their customers to split the cost in this way. As a consumer, it is therefore important to understand what you say yes to when choosing to pay the purchase.
What does part payment mean?
This simply means that you do not pay the full price directly, but rather divide the payment into a number of smaller installments. The installment period is often individual and therefore varies, usually between 3-36 months.
Which players offer part payment?
Perhaps the most common example of installment purchases is when we buy mobile phones. They often come with a subscription and a down payment on the phone for 24 months. Today, however, many companies in most industries offer the opportunity to split the payment when you shop.
Is there interest-free installment?
It is often advertised about interest-free installment, but is it really completely interest-free? Usually, it is a matter of no nominal interest being charged on the amount. On the other hand, the additional hidden cost is usually used as a toll and arrangement fees. The installment is thus not free in practice. Therefore, it is wiser to look at the effective interest rate, it includes all fees in the calculation.
Sometimes there are also arrangements that mean that the installment is quite favorable for a limited period of time, for example interest-free installment for 6 months. This may sound tempting, but if the entire amount is not paid after 6 months, the installment will be transferred to a longer repayment plan – with interest and expensive fees.
Part payment or private loan – what is best?
Total interest expense
The most important difference between installment payments and instead of taking a private loan to finance the purchase, the installment payment is usually more expensive. The sellers in the stores are often quick to tip about part payment. And certainly it can be tempting to be able to go home straight away with a new TV without having to wait. However, it is always wise to go home and think about it first. Study the contract terms in peace and quiet, and then compare what it costs to finance the purchase with, for example, a private loan. Don’t forget that this is the effective interest rate you should compare.
Deduction for interest expenses
Another big difference is that there are various fees that usually account for a large part of the total cost of the partial payments. Fees cannot be deducted when you declare.
For a private loan, you mainly pay interest instead. You can deduct interest expenses in your tax return. It is possible for the lender to submit a check statement to the Swedish Tax Agency on how much interest you paid during the year. Your statement then automatically states the amount you paid in interest. 30% of the interest amount (up to $ 100,000) is deductible and may be deducted from the tax.
Collect your installments
If you have several installments or small loans and credits, it pays to collect them into larger, cheaper private loans instead. Maybe you have chosen to pay for a trip? Or taken a caravan loan without cash? Regardless, Astro Finance can help you borrow up to $ 600,000, to collect existing loans, contact us and we will help you!
Compare over 30 banks with Astro Finance
Before deciding to make a partial payment, you should carefully read the terms of the agreement. Maybe it will be cheaper to take a private loan instead? When comparing interest rates on private loans, you should always compare with as many banks as possible. All banks specialize in different types of customers. It is therefore not possible to say that one bank is better than another when it comes to loans. This is why it is important to compare different loan offers to find which bank suits you best!
If you as a private individual go to several different banks to compare the terms, they each take credit information on you. This affects your credit rating and can impair your ability to get a really low interest rate. If you choose to compare with Astro Finance, only one credit report is made. The service is completely free of charge and you do not commit to anything when you make a comparison. Instead, Astro Finance gets paid directly by the bank or lender when we help them get a new satisfied customer.