Understanding the Benefits of Paying In Instalments

Paying in instalments has both advantages and disadvantages. When done carelessly, you may find yourself owing more money than you can afford each month and in debt over a variety of different purchases. But, with sensible choices and planning, there can be some great benefits to this payment method. Knowing the points of both will give you an insight into whether or not it’s the best option for your situation.

Understand the Terms and Conditions of Instalment Payments.

Before committing to an instalment payment plan, it is essential to understand all of the terms and conditions associated with it. Pay attention to the total cost of the payments you will be making over time, including any additional fees or interest that may be charged for missing a payment or extending your instalment plan beyond its initial term. Additionally, find out if there are other requirements of the plan such as maintaining a minimum balance in your account to make regular payments.

Lady sat with a wallet and card, ready to make a purchase
Image by Jan Vašek from Pixabay

Ideal For Unexpected Expenditure

As much as we might all like to have a large pImage by Jan Vašek from Pixabayot of savings, that’s not always the case. We might not have anything at all, or perhaps the savings we have are only a small amount right now. They might already be allocated to something else, like a desperately needed car or the deposit for a house. If that is your situation, what happens if something happens and you have to pay out? That something could be an emergency repair on your house or vehicle, clothing for an important interview, a fine, or anything else.

In this case, as long as it meets your budget, as mentioned above, paying in instalments can be the answer. You can meet the unexpected cost, but it won’t put so much of a dent in your income or savings as if you had to pay the full amount immediately. 

Planning For The Future 

You might assume that the sensible way to live is if you can’t afford something right now, don’t buy it – save up instead. That is great advice and something to stick to if you can. However, if there is something you need to pay for that will help you in the future, and it’s best to pay for it in advance to ensure it doesn’t become stressful for you or anyone you love, instalments will work wonders. 

Group of men, carrying a white coffin for a funeral
Image by Carolyn Booth from Pixabay

A great example of this is your funeral. If you choose to look into pre paid funeral plans, you can not only reduce the financial burden on your loved ones, but you can also arrange everything yourself so it’s exactly what you want, and no one else has to go through the process on your behalf. 

You Can Track Your Finances Better

You can control how much you pay each month by selecting a longer payment term. When you add this to your regular monthly bills, you’ll have a clear picture of your total outlays and know whether or not you’re staying within your budget. As a result, managing and keeping tabs on your money will be less of a hassle.

If you have had issues with budgeting in the past, having regular monthly outgoings can help you understand exactly what you’ll be spending and what is left over, and that can help you become more financially savvy so that when you’ve paid everything off you stay in a healthy financial position.

Explore Different Payment Options Available to You.

Before deciding to pay in instalments, take some time to explore the other payment options available to you. Ask yourself if one-time payments may be an option, or if there are different ways you can lower the total cost of your bills such as negotiating with creditors or opting for a debt consolidation loan. Consider all possibilities before committing and never commit to a plan that exceeds your financial capabilities.

Analyse Your Finances Before Making a Plan.

Before you commit to a loan or payment plan, analyse your finances. Make sure the payment options will fit into your budget and that you have no other payments due around the same time. Knowing how much income is coming in is key as this can determine what type of instalment payment plan may be best for you. Calculate any fees associated with taking out the loan and make sure these are taken into account when making a decision.

Budget, calculator and folders ready for financial planning
Image by Steve Buissinne from Pixabay

Use an Online Calculator to Create an Ideal Repayment Plan

To ensure you are selecting the best payment plan for your financial situation, utilise online calculators that can give you an idea of what repayment options may be ideal. This will help you easily compare and think through which payments will be more efficient in terms of time and budget. Calculators can also allow you to input assets to determine if they could reduce monthly repayments or the overall cost of the loan.

Maintain Good Credit Behaviour While Paying in Instalments

It is essential to keep up with payments and make them on time so that the repayment structure does not become an added burden. The consequences of late or omitted payments can significantly impact your credit score, making it difficult to obtain credit in the future. Additionally, more frequent bill payment reminders and multiple payment options should be taken advantage of, as well as tracking your expenses to avoid overspending.

Financial woes can be daunting, especially if you don’t know how to handle mounting debt. One effective method of dealing with payments is paying in instalments, which allows people to manage their finances still and pay off all of their obligations without having to make one large payment.

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