Many people choose installment payments because they feel less expensive than paying cash. With installments, their monthly salary still feels secure, and they can use their dream items right away. But is installment payment always a wise choice? Let's discuss this.
Installments make purchasing large-ticket items more affordable, such as gadgets, vehicles, or household necessities. Furthermore, some installment plans with 0% interest can be a smart strategy if implemented consistently.
Installment Risks
The problem arises when installments are made without careful consideration. Too many installments can erode monthly cash flow. Especially if the interest rate is high, the total payment can be much greater than the original price of the item.
When Should You Pay Cash?
If the item you're buying is still a "want," it's better to save up first and pay cash. This gives you peace of mind because you won't have any monthly obligations to meet.
If installments are an option, make sure the total installments don't exceed 30% of your monthly income. Also, choose an installment plan with low or 0% interest to avoid becoming a long-term burden.
Ultimately, both cash and installment payments have their pros and cons. The key lies in financial literacy and your ability to manage your cash flow. Don't let installments, which initially seem like a small expense, turn into a burden that makes you dizzy at the end of the month.
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