When is it advisable to pay in installments? - Personal Finance

When paying for a purchase, people have different options: they can either choose the cash modality, in which it is canceled at the time of purchase, or opt for payment in installments, a strategy that allows the customer to leave the debt of a product or service in several installments.

Who has not faced the dilemma of having to choose whether to pay in cash or decide to do it in installments? While both are viable choices for customers in most stores, there will always be a choice to be made. The ideal, of course, is that the pocket and financial projections benefit.

When to pay in installments? What to keep in mind

According to Go Cardless, specialized in collection systems, the payment strategy in installments is recommended in two cases: in the purchase of high-value products -when it exceeds 500,000 pesos- and in the purchase of a large number of items that, together, can also raise the amount.

«Especially in these two cases, the client will value the flexibility and ease that can be paid in installments,» details the aforementioned company.

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Experts recommend paying in installments when the value of the product is high.

According to the BBVA banking entity, on its website, it makes purchases of common payments such as gasoline, groceries and other similar expenses, excluding monthly charges. The ideal is to keep it with an active and functional balance.

One of the great advantages of this modality is that, as long as the client makes the payment on the established dates, they will be able to accumulate a positive credit history. In the future, for example, this may benefit the acquisition of a larger amount of credit in a banking institution.

The installment payment modality can be useful to alleviate the personal economy, as long as it does not force to destroy the cash all together. However, even when it is a viable option to make a purchase, there must be limits.

You must consider your debt capacity, how much you can pay each month and, of course, how extending a loan more than necessary will impact your future projects

In any case, it is necessary to ensure that, when making a payment in installments -financed by credit card or directly with the establishment- you have the ability to cancel. Do not forget that financial institutions keep a record of the payment behavior of customers, which is reported to credit bureaus.

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It is at this point that you must know how to differentiate between the cut-off date and the maximum payment date so as not to be informed. The first refers to the day on which the bank closes its credit for the month; while the second is given 15 days later, when the bank indicates the last day that the fee can be paid without charging interest for late payment.

Another aspect that you must take into account is the term to make the payment, as it can be a key detail both to avoid interest cost overruns and to plan the amount of money that will be dedicated to paying each installment.

The term that is chosen when receiving a loan directly influences the value that will be paid each month.

“This is a very relevant decision that impacts the quality of life of users of the financial sector. Each person must consider their debt capacity, how much they can pay each month and, of course, the fact of extending a loan more than necessary will impact their future projects”, explained Lilian Perea, executive president of Bayport Colombia -financial that provides second opportunities to report in risk centers-, according to the newspaper specialized in economy ‘Portafolio’.

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The BBVA bank recommends, in these cases, planning the monthly payments. Don’t make hasty purchases without first analyzing your family budget and devising a payment plan for the card. In the same way, it is not advisable to use the full amount of the card. You should try to occupy only 30 percent of its capacity.