Installment purchase service extends payments for essentials when purchasing high-priced items without having to pay the full amount.
However, there are risks, you may incur fees and interest if you do not pay on time. You may also have trouble paying in installments for something you bought, even if it's faulty or unsatisfactory.
Consumers don't always understand how these installment plans work or what help they can expect if something goes wrong.
Many branded businesses are offering installment buying services by partnering with fintech companies. Even banks and credit card companies are offering their own versions of these transactions.
Participation is increasing during the pandemic, affecting many families' incomes and driving more people to shop online.
Instead of making payments over time to qualify for a purchase, you pick up the item first, then make a scheduled payment.
Getting approved for installment purchases service, if you haven't done it before, usually takes only a few seconds. Most installment plans only perform a soft credit check to confirm your information, without affecting your credit score. You can choose to link your payments to a debit card, bank account, or even a credit card, depending on the provider.
Please note, when you choose that installment purchase, not every purchase may be approved. Fintech companies set limits on how much you can defer, depending on your payment history, as well as retailer policies.
Most shoppers actually make relatively modest purchases, often using the bundle for fashion and beauty products, gaming toys, as well as food delivery.
One very obvious risk with installment plans is that those seemingly reasonable payments could tempt you to splurge.
You may also face challenges if you have problems with your purchase, such as getting a refund for a product that didn't arrive or was defective. That's because you'll have to meet the requirements of both the installment sponsor and the retailer.
Unlike credit card issuers, who often stop paying when a transaction is disputed, institutions that support installment purchases often require consumers to contact the merchant first to receive their payment. credit for return or refund. Until the lender is notified by the retailer that the transaction has been voided or a refund is issued, you may have to continue making payments on your loan.
That often leaves the consumer to insure themselves that the seller complies and the payment is credited by the installment lender. These tasks can be challenging, especially during a pandemic.
How to avoid risk problems with installment purchase service
Your installment purchaser service may allow you to spend up to VND 20 million in one go, but that doesn't mean you should.
So take a close look at your budget and income to see how much cash you'll have to spend.
Once you understand your spending limits, make sure you stay on track, perhaps by keeping a tight list of planned purchases. And bookmark an account for future due payments.
These installment purchaser service are still available, some with fees and interest rates and some without. It's easy to get confused, especially if you're signing up with more than one lender.
So check the terms of the loan on their website, which is often offered on the support or FAQ page, or call and ask.
Are late fees automatically applied, or can you be waived if you pay one day late?
If you miss a payment, will you be barred from future purchases?
Are late or missed payments reported to the credit bureaus, possibly affecting your credit score?
Make sure you're familiar with the rules for the specific type of loan you're using, as some lenders offer more than one type of funding program.
For example, affirmation offers loans of different lengths, terms and interest rates may vary by retailer and your credit profile.
Consumers can easily lose track of their installment payments being due every two weeks instead of monthly which can add to the confusion.
Some consumers may also consider late fees as a small expense, but they may actively accept the purpose of using these programs.
Let's say you end up paying VND 300,000 in late fees for a VND 10 million item — effectively increasing the item's price by 30%. If you don't have enough money in the bank to pay that bill, you may be charged an overdraft fee of VND 350,000.
The best way to avoid these costs is to automate the entire process. Schedule regular payments through your bank account or card.
You can also set up text or email reminders that payments are due. Some financial institutions that offer installment purchaser service will do this automatically.
Unless you're spending a small amount that you won't miss, an installment plan isn't the best way to try out a new product or service.
If you're on a buy now pay later plan, you may want to stick with well-known retailers that have a track record for on-time delivery and quick response if there's a problem with your purchase.
You can also think twice about using these plans to make travel arrangements, such as buying airline tickets. In particular, when dealing with online travel booking sites, you may offer inflexible refund policies if your travel plans change or are cancelled.
While point-of-sale installment purchaser service can be convenient, you'll likely be better off in the long run using a credit card, as long as you can pay off your balance in full on time.
By using a credit card, you can build a good credit score, which is important to your overall finances. Your purchases may also qualify for rewards, such as cashback or discounts, which can increase your budget.
You also have stronger consumer protection when you use credit cards. In addition to investigating disputed charges, some issuers may offer purchase protections that will cover your costs if items are damaged or stolen.
In these uncertain times, this article can be of great benefit if you certainly understand and better understand the potential risks that come with installment purchaser service.