In our country the installment system is the idea of buying something different. Just like buying directly with 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 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 a product worth Rs 10,000. Let's assume that 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 is that you are rupee. 1,000 and leave (initial amount. Down Payment in English), take the item. The remaining amount, in 10 installments, is Rs. 1000 will pay.
Rs. 11,000 - Rs. 1,000 (initial amount) = Rs. 10000 (Leftovers)
Rs. 10000/10 installment = Rs. 1,000 (one installment)
Thus, in installment mode, we are unwittingly and indirectly in debt. By purchasing the item in installments, we get stuck in a 10% debt. Many of us do not know this. All 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 trend that is very wrong.
The disadvantages of buying stuff in installment mode:
An image is created that says we can buy even things we can't afford. Psychologically, it forces people to buy things they can't buy again.
The installment gets stuck in debt:
If you plan to sell depreciated 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 is going down. 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)
If there is no installment,
Rs. 10,000 - Rs. 6,000 = Rs. 4000 (loss)
Therefore, by purchasing depreciation items in installments, we incur high cash losses.
When we buy the product in installment mode, we lose money on various fees called Initial Processing Fee.
In installments, the interest rate is usually much higher
Failure to pay the installments will result in various stressors due to the compulsion paid by the installment company.
In some installments, even if you pay for the item and intend to quit, you will lose more money.
How to buy items instead of installments:
If you want to buy any item, it is best to save money and buy it. For that, financial planning is essential. For example, Rs. 10,000 per month, Rs. 1000 save and 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 seamstress I know started a sewing machine in installments. 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.
For those in the food industry, such as swiggy, zomato may not have enough money to buy a two-wheeler. They also get a job by installing two-wheelers. To multiply money, a two-wheeler helps.
Unless there are reasons like these, it is best to save money and buy for any item. Do not get stuck in installments. It creates a magical image that even the items we can't buy, the installment can buy. That illusion leaves us trapped in a debt trap and makes the future questionable.
We save money and buy things. In installments, we will avoid purchasing items.
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