Have you seen the latest phone or laptop in the market? Did you see that they offer 0% interest on installment? Did you know how easy it for it to apply for installment without a credit card? These questions would usually get a yes as an answer. These days installments are just one day process for non-cardholders and can be done in minutes for cardholders. It’s widely promoted in the Philippines since a lot of people here are so in love with gadgets and credit.

Anyways, I am not sure if that is also popular in other countries, I guess it is. Many of us want to get our wants as soon as possible. We rarely think of the consequences of getting these things in an instant. I used to love installments but I realized that we shouldn’t. I have some reasons why I started hating it.

Let’s start with credit card users.

0% Interest Rate

For us who have credit cards, it’s easy to get an installment and we usually get 0% interest rates. Is it really a 0% interest rate? NO!!!!! It isn’t that really all the time. When buying gadgets especially LAPTOPS, they give you a 26k price with 0% interest on installments. But when you ask how much it would be in straight cash, usually you get an off. Based on experience in the past, my mom was able to buy a laptop in straight cash for 23k instead of 26k.

Although for some devices like phones, they really give 0% interest, it still depends on what you buy. Doing straight payment can still be applied to credit cardholders. So if there’s a discount for straight payment, you can still use your credit card for that(It depends on the merchant).

Also, paying the installments in advance may not be allowed (You may contact the bank for terms). I created a note copy on Evernote about some of the terms for the banks. Please refer to the link below:
Evernote: Installments Terms

Credit Card Limits

When I was younger, I thought having a credit card allows me to do installments anytime I wanted. That’s why I got my card. However, I found out during my first installment in the past that my credit limit will be taken over by the full amount of the purchase. So if I opted in for 30k worth of items for 24 months, they’d deduct the 30k outright and will be billed to you as installments every month. So if you only have 40k limit, your only allowed to spend 10k for the rest of 24 months. Although your payments will be added to your limit, I felt like it is still a wrong move to get a high-priced item in installments.

Based on my readings in the past, you can’t finish your installments early. Most banks would charge you a termination fee or they may require full payment for the rest of the months if you wanted to finish the installment quickly. So you may be stuck with waiting for the installment to finish. I can’t get the exact reference for that but I took one of the terms and condition for BDO Easy Pay installments and HSBC which can set as an example.

Check out my Evernote link below:

Evernote: Installments Terms

In addition to credit limits, the BUY NOW PAY LATER option sucks.

This would prolong your agony with your long term installment, usually, this scheme allows you to get your first installment bill in the third month. So if you have to suffer from your limit for 24 months, they’ll add up 3 more months on top of that!

For non-cardholders

Interest rates

I haven’t really got an installment from companies like AEON and Home Credit, but I did inquire once with Home Credit. The way I saw the monthly installment fees, it seemed to be very affordable. However, if you would take a look at it together with the down payment, you’ll realize that it’s a huge amount of money. If it isn’t necessary just try to save instead of getting installments.

Also, upon checking their websites, the interest rates for gadgets are higher than other items. These companies are of course taking advantage of the market for gadgets and mobile devices. There’s nothing wrong with that because they’re doing business but if you’ll pay for something higher just for a smartphone, I don’t think it would really be a good move.

home credit interest rate and sample calculation