Furniture stores and electronic markets are increasingly attracting customers with zero percent financing and cheap installment purchases. Banks are also enticing customers with corresponding credit offers and want to make consumption “palatable” to them. But which of these credit offers is ultimately best for the consumer?
Everyone has probably heard of keywords such as zero percent financing in the electrical appliance shop of choice or in the furniture store. Or they have even taken advantage of the offer if the purchase of a new refrigerator, a washing machine or a larger couch landscape or more modern kitchen equipment was part of their home. Of course, hire purchase is a convenient way to acquire expensive furnishings, although not infrequently, due to appropriate credit conditions, expensive matter.
As a customer, you save yourself the trip to the bank, the tedious comparison of credit offers and do not risk that the desired object is perhaps sold out until you have received the okay from the house bank for a consumer loan. Because the installment financing is carried out comfortably and uncomplicatedly directly on site in the retail shop. And the furniture and electrical appliances can be taken directly with you – or have them delivered.
The disadvantages of instalment purchases for the customer
Anyone who makes an instalment purchase in a shop signs a loan agreement with the partner bank of the company where he makes his purchase. This sounds tempting at first, but it can also involve a few stumbling blocks:
- The 0% financing: 0% financing can mean two types of installment purchase, so it is definitely advisable to take a look at the terms of the loan agreement. Genuine zero percent financing can be a savings option for customers because they have purchased the appliance or furniture at the end of the contract period for the same price as if they had paid for it in cash. However, there are also 0% financing arrangements that are limited to a certain term. For example, to 12 months. After that, interest rates are due for the repayment instalments, which are often in the double-digit range. This makes an instalment purchase absolutely unattractive for the end consumer.
- Normal instalment financing: With normal financing in instalments, customers rarely benefit from the convenience factor that comes with taking out a loan in a shop. Because, unless it is explicitly a zero percent financing mentioned above, horrendous interest rates often lurk in the small print of the loan agreement, which can quickly amount to five times the amount of an instalment loan at the bank.
- The deceptive appearance: it may at first seem quick and uncomplicated to conclude an instalment purchase directly in the shop. But the problem is that what at first seems convenient often puts customers under unconscious pressure. So they do not read through the contract details completely or just skim them. In doing so, they quickly overlook important information that can cause the later price of their purchase to rise considerably. Thus, supposed comfort quickly turns into a stress situation that can lead to unpleasant surprises.
That is why a consumer credit instead of an installment purchase can be worthwhile:
Is a loan comparison time-consuming? Yes, certainly more time-consuming than relying blindly on the offers of the furniture store or electronics shop. But the time invested pays off in most cases. On average, instalment loans offer significantly better conditions than instalment financing. Customers expect even better offers on the Internet, on comparison sites or at direct banks.
In the case of instalment purchases, creditworthiness and conditions are checked quickly, but the check is also kept relatively simple. For customers with a weak credit rating or existing liabilities, this may sound tempting, but in the long term it leads to financial problems. This is one of the reasons why it is wiser to check an installment credit in the run-up to a purchase than to quickly sign the financing contract in the shop.
Thanks to the current phase of low interest rates, consumer loans are the cheaper alternative to instalment purchases in shops. Lending rates in the single-digit range are the rule, while instalment financing via the furniture store or the electrical market usually incurs double-digit interest rates. Moreover, if you consciously take out a loan, you also keep a better eye on your own finances and expenses than is the case with often temptingly small installments.