What you need to know about installment purchase programs

Like any other loan, customers still have to make payments quickly to maintain a good credit score because most installment purchase providers report repayments to the credit bureaus.

Why are installment purchases more and more attractive than credit cards?

Over the past few years, installment purchases have become a prominent form of financing. In India, demand for installment purchases has been growing for about 2-3 years, and has been further accelerated by COVID-19. Installment purchases have emerged as a more convenient payment method that essentially reduces the financial burden on shoppers.

At the same time, industry experts say, installment purchases will become the fastest growing online payment method, from 3% in 2020 to 9% in 2024.

A Q4 2020 installment purchase survey predicts that installment purchases will grow by 65.5% in India, reaching a value of $11,570.7 million by 2021. Adoption of this payment method is expected to grow at a CAGR of 24.2% from 2021 to 2028, taking the gross merchandise value of installment purchases in India to $52,827.2 million in 2028, from $6,990.5 million in 2020.

Installment purchases increase conversion rates and average order value for sellers by reducing buyer hesitation. It is expected to continue to gain popularity as a win-win payment method.

How do installment purchases work?

The core tenet of the installment purchase service is that it allows one to pay overtime - but afford what to buy today. Credit terms for installment purchases range from 30 days to 36 months, depending on transaction size.

Installment purchases are becoming more and more popular as it offers a seamless shopping experience for customers. As a 100% digital solution, installment purchases facilitate a quick one-click checkout process”. To use installment purchase services, buyers need to register once at checkout and can continue to use the solution when shopping across different brands and sales sites. Installment purchases typically have low or no funding costs with flexible repayment schedules.

How is installment purchase different from credit card?

Installment purchase program is a one-click credit service available at checkout on merchant apps and websites. With the installment purchase program, one can take advantage of this short term credit option to make purchases immediately and pay for them at a later date.

Here's how installment purchases differ from credit cards:

Transparent pricing model and low cost: installment purchases often follow a transparent pricing model and low cost as many offers are subsidized by brands so that customers get the best value of their products. endow. Unlike credit cards that aim to fool customers with hidden fees and exorbitant interest rates, installment purchases are transparent. Customers know exactly how much they will have to pay.

Completely digital and instant registration process: Anyone anywhere in the country can sign up and use the service. Credit Cards, on the other hand, require weeks and lots of paperwork. With digital, one can get instant approval and start trading.

More accessible: By comparison, experts say, credit cards are for high-income customers, those in big cities and wage earners. The installment purchase nature is designed for a much larger market, including new credit customers or those with insufficient credit history. Most installment shoppers use alternative data and proprietary models to approve these customers.

Higher interest rates - Credit card or installment purchase provider

It is a fact that credit cards are the most expensive form of credit. Interest rates on missed payments can be as high as 48%, while installment companies charge around 0 to 24% interest depending on the seller, the number of payment periods and the borrower.

Why are installment purchases more and more attractive than credit cards? Why do young people find installment purchases attractive?

The majority of consumers today are always looking for trust and transparency in their transactions - something that traditional credit cards suffer from huge deficits. It is clear that consumers have a reluctance to use credit cards and the biggest source of this dislike comes from 'hidden fees' or various transaction fees that a credit card company charges. use for its customers. "

Annual maintenance fees, cash advance fees, fuel surcharges, and GST fees are just some of the extra costs that users incur when using a credit card. Pay at delivery builds trust in the transaction and cash on delivery is a real 1-click payment and this is what installment purchases bring to customers. consumption.

Fully digital, online and instant installment purchase service. Signing up and getting approvals is easier and faster. No need for an agent to come in to do the paperwork.

The advantages of installment purchases like easy registration, convenient use and quick payments, talking directly to digital savvy customers who don't like cards who claim credits small quickly and conveniently at their fingertips.

Use installment purchases not only to buy essentials, but also to fulfill their aspirations, such as pursuing a skill-enhancing course or traveling to a dream destination.

Things need to notice

Even with all the attractive benefits and features, industry experts say customers should be careful when using installment purchases.

While there are differences from one lender to another, late fees or penalties due to one-time fees are not usually compounded, a marked difference from credit cards. It's important to note that installment purchases are still essentially a loan, and as such, installment purchase providers can report a person's repayment behavior to credit unions.

Like any other loan, customers still have to make timely repayments to maintain a good credit score, experts say, as most installment purchase providers report repayments to the installments. credit institutions.