Each person wants to somehow provide for himself, trying to satisfy all his needs and requirements. Sometimes additional funds are needed for this, many immediately think about a loan or an installment plan, not even knowing what their difference is. Many people confuse these concepts, because both credit and installment plan are designed to ensure that a person will have to pay a certain period of time for a certain amount of money. Let’s finally figure out what are the differences between installments and loans, as well as what their advantages and disadvantages are.
What is a loan?
Credit is a financial relationship between a credit institution and a borrower. A person can borrow the amount of money he needs, while signing a specific agreement on the fulfillment of all requirements, namely paying a certain amount of money on a monthly basis and avoiding delays. The bank usually pays for a full one-time purchase of a person and he subsequently monthly returns funds with an interest rate for use.
What is installment loan?
Installments can be called a method of acquiring goods in a store where the seller offers the buyer to pay for the goods in equal parts, without additional payments. So the store gives you the opportunity to give the amount for the purchase in parts, which will be quite convenient for the buyer, while the store will thus increase the demand for its range and popularize its outlet. Here, the user must return the funds monthly until the goods are paid in full.
Advantages and disadvantages of installment and loan
It is very difficult to immediately understand which of the options will have the most advantages, therefore it is worth highlighting them all, and also not to forget about the disadvantages, because there may even be more of them.
Among the advantages of a loan are the following:
- The ability to pay for purchases immediately, and then pay the loan;
- The flexibility of design allows the borrower to take, for example, a loan for household appliances * at the right time, and then make purchases;
- It is very easy to pay unforeseen expenses with a loan;
- A person immediately receives money in his hands;
- Safe clearance and receipt of funds.
There are enough advantages, but let’s see what benefits installment has. The main advantages of installments can be called:
- No need to pay an additional commission or other payments, except for the goods;
- Minimum requirements from the borrower (do not need a lot of documents);
- Draw up very quickly, literally 15 minutes;
- No guarantors or collateral required.
The advantages of both credit and installment plan are quite significant, and there and there you can get the necessary service and be satisfied. It is worth considering now the shortcomings of these services in order to accurately understand that everything is better.
Significant disadvantages of the loan are:
- High interest rate, which sometimes exceeds half of the loan amount itself;
- A short lending period, which is not convenient for everyone;
- Sometimes a bank can give out only a certain amount, it can be less or more for a person’s needs, which is very inconvenient.
There are drawbacks in loans, but they are not very significant, what will be the disadvantages in installments and how they will differ. Installment has its drawbacks, namely:
- Installment is issued for a very short period, which is not always convenient;
- Be sure to make a down payment for the product and most often it should be more than half the cost;
- Since the installment payment period is not long, purchase fees will be increased, which can be very large.
Having considered all the advantages and disadvantages of both installment plan and loan, we can conclude that in both cases there are pluses that make the service very profitable, but at the same time there are also disadvantages that are not so beneficial for borrowers. Differences between a loan and an installment plan are obvious, so before buying, you should know what will be more profitable for the person himself, because only he will decide how it will be more convenient for him to pay for his purchase, as well as which option will be most convenient for him. Each person must independently decide which option will be more convenient for him in a particular situation.