Installment plan – what is it? Conditions, requirements, differences from the loan

Installment is a type of payment method for purchases/services, which is made by splitting the amount into equal parts and is paid within a strictly specified time frame. This can be described as the meaning of installment from the concept from the point of view of economics.

Installment has become a more profitable option in comparison with a bank loan since the consumer is obliged to pay the full amount of the goods without overpaying interest to third parties. As you know, banks, providing a consumer loan, take a rather big interest for using the borrowed amount.

Installment is a type of payment in which the payment for goods or services is divided into parts. An installment plan is considered one of the types of loan obligations that are gaining wide popularity among Russians. Today, the opportunity to take a favorite product in installments will no longer surprise the consumer, however, as practice shows, this type of payment is often confused with an ordinary consumer loan. How an installment plan is fundamentally different from a loan, and what advantages it has, it’s time to figure it out in our article. The article is divided into subtopics in the table of content to make it easier for you to understand.Please feel free to read to the end.


  • What does “loan” mean?
  • Credit – a loan for all occasions.
  • We buy goods in installments.
  • We buy goods in installments
  • Examples of
  • Conditions of the installment plan
  • Requirements
  • Differences from credit
  • Pros and cons
  • Advice
  • Conclusion

What does “loan” mean?

A loan is the provision of funds or property for a specified period under a loan agreement or free of charge. In addition to money, a car, real estate and much more can be given for temporary use.

For example, an enterprise that owns several premises may transfer one of them to its representatives for temporary use. At the same time, a loan agreement is signed. If the company decides to act not gratuitously and assigns the amount of remuneration, then a lease agreement is signed.

If a cash loan is provided, then a fee for its use may or may not be charged. Relationships in which a remuneration to the lender is established in the form of a percentage of the amount received is most often called credit.

Credit – a loan for all occasions.

Lending always involves interest for the use of funds and the exact date of the debt repayment . A loan can be targeted (for example, a mortgage, which is issued for the purchase of real estate) or non-targeted (consumer). If funds are needed to purchase goods, then the store simply receives the amount and transfers the property to the new owner, who becomes the debtor of the bank or other financial institution.

If the borrower for some reason cannot repay the loan, then the bank has the right to impose fines and penalties, but the purchased goods are not withdrawn in the event of inappropriate lending. The exception is loans for the purchase of specific property (real estate or a car) or with collateral in the form of a pledge of valuable property – then in case of non-payment of the debt, you can also lose the pledged item.

We buy goods in installments.

However, you can buy things not only on credit but also in installments. Installment is the process of purchasing goods with deferred payment, that is, the buyer does not pay the entire amount to the seller at once, but pays it in gradually over the agreed period.

An installment plan is always cheaper than a loan, since in this case only the buyer and the seller are the subjects, without the intervention of the bank, which will take interest for its services. If the borrower is unable to repay the debt, then he may lose the goods: the seller has the right to demand it back.

In a store, of course, it is more convenient to arrange an installment plan than a loan, because you do not have to go to the bank for this. To apply for an installment plan, a passport is required, it can be taken with any credit history, unlike a bank loan.

installment plan

Concept of the installment plan.

Installment plan has exist as one of the ways of purchasing good and other items yet the relevance has not decreased rather it has transformed into a completely new direction of work for banks, shopping centers and supermarkets.

Surely, many readers at least once in their lives have come across the purchase of goods in installments.

It is quite convenient, profitable and efficient, so it is not surprising that an increasing number of our compatriots are actively using this service.

The agreement stipulates an algorithm for repaying the loan, as well as measures applied to violators of the agreement. If a third-party organization – a bank – intervenes, we are no longer dealing with an interest-free (zero) installment plan, but with a full-fledged loan, which is skillfully disguised as an installment plan. It is worthwhile to carefully read all the terms of the contract being signed, so as not to find yourself in an absurd situation and not overpay extra money.

Credit relations arise between the seller and the consumer of the goods sold for sale. That is, the buyer, under the terms of the contract, undertakes to pay in full for the purchase. The contract becomes a guarantee for the seller that the product will pay for itself. In addition, it is a good way to increase sales, as installments look extremely attractive for clients with different income levels.

Why is the installment so popular? 

Simply because it gives buyers the ability to purchase the goods and services they need even without having the complete amount of the item they want to buy. Everything about is very simple, the buyer may not have the required amount on a specific day to pay for the goods he needs. Given the instability of the economy and the average income of the population, shops meet their customers halfway, providing the opportunity to pay the amount in installments. The installment plan becomes real salvation for those who want to urgently purchase the goods, but do not have the full amount to pay off the seller.

The installment plan still represents the relationship between the seller and the buyer, spelled out in the contract, where the buyer undertakes to pay the full amount in due time.

Examples of

To understand how the algorithm works in practice, let’s look at some striking examples.

First of all, it should be said that the terms of the installment plan can differ significantly in two different organizations. The first may require an initial payment, sometimes reaching 50% of the total cost of the goods. The second suggests splitting the entire amount into several small payments, but without a down payment. In addition, the number of months allowed for maturity will vary depending on the value of the item and the buyer’s income level.

So, imagine that your car is out of order at the most inopportune moment. You go to the nearest car dealer office, and you are offered to purchase a new car in installments.

The model that you looked after costs 100 thousand dollars, but at the moment you do not have the full amount. So this way of purchasing turns out to be the only right decision that you have to secure a new car at that moment.

The product is selected, it remains to read the conditions:

  • The first installment is 20% of the total amount and is equal to 10,000 dollars;
  • The amount is divided into four parts, that is, it is necessary to repay the loan within four months;
  • The amount of the obligatory monthly payment is 10,000 dollars since the balance of the debt after the first installment is 40,000 dollars (40,000/4 = 10,000).

This example demonstrates an interest-free loan payment, that is, you pay only the full cost of the item, without overpaying any interest.

You use borrowed funds for their intended purpose, purchasing goods, or pay for services exclusively from the partners of the bank that provided the loan. When all the conditions are met, you do not deal with extra interest, simply making monthly payments, according to the contract. To make what we are talking about clearer, let’s assume that a filling called ABC Petroleum made an installment plan to the public.

ABC Petroleum initiated a unique experiment: it will soon be possible to purchase gasoline by installments at gas stations. The first “experimental” will be taxi drivers, who will be able to issue an installment card with a limit of up to $15,000 for the purchase of gasoline through a special application. The product makes it possible to purchase gasoline in installments within the period of 6 months, with the timely repayment of the amount allocated for the purchase of raw materials, interest will not be charged.

In the event that the obligatory payment is overdue, the installment plan will automatically grow into a loan from 59% per annum. This is a great example of how thin there is today a fine line between installments and a loan, and how ignoring obligations lead to overpayments. If the borrower pays the amount in full by the end of the agreed time ($ 15,000), then he will be able to protect himself from credit obligations and a high rate on a newly made loan.

installment plan and methods of obtaining

Conditions of installment.

In such a contract, the object of sale appears, its value, as well as the following points:

  1. Under what conditions is the installment plan issued? Is there a down payment, how many percent does it make of the total value of the goods, is there interest, etc .;
  2. The number of months provided for by installments, as well as the amount of the obligatory monthly payment, are negotiated;
  3. Possibility of returning the goods or withdrawing the goods from the buyer in case of non-compliance with contractual obligations.

Take note: if you took the goods in installments, but have not yet paid the full amount in full, you can be called the user, not the owner!

All issues related to the installment plan are regulated exclusively by the Civil Code of the Russian Federation, therefore, many controversial issues often arise in the relationship between the buyer and the seller.

In order not to become a victim of circumstances, read all the terms of the contract in detail.


Who can count on registration? At first glance, it may seem that literally anyone who wants to be able to come to the store and take the product of interest in installments, but this is not entirely true.

There are a number of requirements that organizations put forward to potential buyers:

  • Present a passport of a citizen of the Russian Federation with a permanent place of registration;
  • Additional identity document;
  • Certificate of income (may be needed if the desired product has a high value);
  • Information about the composition of the family, the presence of a guarantor, etc.

In the event that the desired product is insignificant, for example, a gas stove, a washing machine, etc., one passport is enough. According to consumers, the chances of getting a long-awaited product in installments are increased by providing a certificate of income.

Differences from credit.

Now it’s time to figure out how it differs from a loan. The question is extremely relevant, since most banks offer cards that flow into credit, if the rules for using the interest-free period are not followed. What is the main difference and how not to get a loan instead of the desired installment plan without overpayments.

Installment is a phased payment of the cost of a product. You pay only the amount that is stated on the price tag. When applying for a loan, the bank gives you an amount for consumer needs, which is subject to interest. Interest is the main difference from a loan.

In addition, it is easier to issue an installment plan, the action takes place on the territory of the organization in which you purchase the goods, you do not need to involve third-party entities, and the number of documents required for issuing an installment plan is significantly less. It is much easier to get approval for an installment plan than for a loan, even if you have a bad credit history, there is a possibility. That you can buy what you want in installments.

pros and cons of installments

Pros and cons

Installment is a commercial proposal, the design of which is beneficial for both the consumer and the seller. What are the advantages and are there any “pitfalls” of this type of relationship with a commercial organization?

Yes ofcourse there are some benefits and demerits in using installment as means of securing goods,services or property of any kind.Now let see some of them below.

Benefits installment plan.

  • As a rule, for registration it is necessary to provide a minimum package of documents;
  • Efficiency of checkout;
  • The ability to purchase goods of different groups and cost in installments;
  • There is a possibility of exchange of goods upon detection of a defect or malfunction;
  • No overpayments in the form of interest, which is implied by any credit loan.

Disadvantages of installment plan.

  1. Today, most stores sell goods only when they take out insurance. Thus, third parties (insurance companies) take part in the dialogue and the client is forced to conclude an unnecessary contract;
  2. The presence of so-called “hidden” requirements that the seller does not voice immediately;
  3. Depending on the name of the product and its price, a short period for the payment of funds may be provided;
  4. The need to make a mandatory payment, often it can reach 50%.

5. In addition to the mandatory advance payment and a short period that is given to repay the debt, the interest rate of the installment goods are often offered at an inflated price.


  1. The advantages over a loan are obvious, but just as in the case of signing a loan agreement, carefully study all the points of the document, often additional requirements may be spelled out in it;
  2. So that there are no problems regarding the issuance of goods to you in installments, it is advisable to provide a certificate of income in addition to a passport, so you will look more convincing in the eyes of the seller;
  3. Carefully study the issue of late mandatory payment. A situation may arise during which the installment plan will grow into a full-fledged loan with all the ensuing consequences;
  4. Look for testimonials on a particular store’s product delivery, be sure to deal with a bona fide organization.

Take away.

Installment is a popular way to buy goods, allowing you to split the full amount into equal parts. It is a mutually beneficial option for cooperation between the seller and the buyer, and has significant differences from a loan. Carefully study all the clauses of the signed agreement, pay off the debt on time, and you can buy everything that you have dreamed of for a long time without experiencing a huge burden on your budget.


We hope that now you have an idea of ​​what an installment plan, a loan, and a credit are, understand the difference between these concepts, and can, if necessary, choose what is right for you.

 Did this article manage to convince you that installment is more profitable than a loan? So are you considering buying in installments?Write your opinion in the comments and don’t forget to tell us how after reading this article. “

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