Trying to sell something, and fast? One sure way to get a potential buyer to bite is to offer payment via installment.

There’s something about paying in “gives” that makes the buyer feel he or she is getting a bargain. What was expensive becomes affordable, and what you planned to buy later is suddenly something you can now bring home.

Take a quick walk around any store, and chances are most of the items can now be paid via installment. From appliances to furniture to clothes to shoes, you can choose payment terms from as short as 3 months to as long as 24 months. Even informal sellers know installment schemes are the way to move their goods. You or someone you know are likely to have been tempted to buy jewelry when told they can pay for as long as 2 years with the seller visiting them personally to collect each time.

Postponing payment may sound like a great idea, but do not forget that the day of payment will still come. So when do you say yes, and when should you say no?

#1 Yes to absolutely zero interest

If you pay your credit card balance in full, you can confidently say yes to installment schemes that offer zero interest. That’s because you are assured of absolutely zero interest, and no chance of paying interest on your unpaid balance plus the installment loan you just signed on for. However, if you only pay the minimum amount due on your credit card, that zero interest offer will likely form part of your total unpaid balance, and subject to at least 2 percent monthly add-on rate.

#2 Yes when you need flexible payment terms

If your washing machine breaks down, or the school tuition fees are due, and you do not have enough cash, paying by installment is a welcome option. But don’t say yes to the first offer that comes your way. In the case of the washing machine, check where the interest rates are lower. Scout for promotions that offer lower prices or rebates when availing of installments. With school tuition fees, check if your credit card offers a better deal, or if the school has an installment plan with friendlier terms.

#3 Yes when you will end up paying less

I paid P600 less for a pair of shoes by signing up for an App that automatically splits my purchase cost to 3 months at zero interest. Sounds too good to be true? Turns out the App will charge all 3 payments to my enrolled credit card or virtual wallet. So as long as I pay my card balance in full every month, this is a pretty good deal. Penalties do apply for late payment so make sure not to let that happen.

#4 No for impulse buys

If you feel tempted to buy something you don’t really need because it looks affordable with the price split into 12 or 24 installments, stop right there. That’s a long time to be tied to payments for something that you may regret buying. If it’s not a planned purchase, why not sleep on it for a couple of nights or more. Because the sad truth is if you are paying for something over a year or two, what it really means is that you can’t afford it right now.

#5 No when the payment term is longer than the product life

When borrowing for tuition fees, payment terms should be 12 months or less. Why? Because there will be tuition fees again next year, and you don’t want to be paying for last year’s school fees and the current year’s along with your living expenses. That’s one sure way to end up in debt. Consider the same for computers, even cars. Also, don’t forget that the longer the payment terms, the more interest you are paying.

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