Very often, people resort to the services of banks in the field of borrowing money to purchase real estate, household appliances, and so on. There are numerous options for bank-client interaction, but there are only two tools in the lending segment. This is, directly, a loan of money at interest and instalments. In this article, we will take a closer look at what the direct differences between these two methods are. By the way, don’t forget to compare plans with Panora!

What Is It?

A loan is a targeted financing of a bank for the purchase of a particular product at the expense of borrowed funds at a certain percentage and for a specified period. That is, the bank fully pays for your purchase, and you return the money to it, considering the interest rate set at the time of signing the loan agreement.

Instalment is a method of purchase in which the store provides the buyer with the opportunity to pay for the goods in equal parts, without additional payments, for several months. That is, the store, to increase the demand for its goods, allows the buyer to repay the debt for the goods in small parts.

Therefore, the main difference between a loan and an instalment plan is that only a bank can issue a loan and at the same time ask you for interest, and you can agree on an instalment plan in a store and not overpay anything for the purchased goods.

How to distinguish a credit from an instalment?

For ease of understanding the difference between instalments and loans, consider the following indicators:

  • The absence of interest is a clear difference between an instalment plan and a loan (although there are already banks offering interest-free plans for everything, but only in partner networks);
  • Processing time – most often, an instalment plan can be issued in 15-20 minutes, and for it, you just need to have a passport with you, and in the case of a loan, it may take more time, and you will also have to provide countless additional papers;
  • Credit history for the store is not critical, more precisely, they do not check it, unlike the bank. In most cases, it is a damaged credit history that causes a bank to refuse a loan;
  • The instalment plan involves initial payments in the amount of at least 30% of the cost of the goods, but the bank may not require this;
  • The loan term, as a rule, can reach 5 years, and the store most often provides instalment plans for up to six months;
  • Most often, a loan is issued against a guarantee or collateral, and the instalment plan is seldom supported by anything, which is a very profitable option for buyers;
  • When lending, the purchased goods immediately become the property of the client, and during the instalment plan it is transferred to him on the terms of use, and only after the full repayment of the debt becomes property.

So, if you need to arrange the purchase of any furniture or household appliances, then instalment plan is the most convenient and easiest option. If you need money directly, then it is best to look for favourable credit conditions. At the same time, be sure to read the terms of the contract cautiously (especially what is written in small print). It is advisable, in general, not to rush and look at each proposal several times.

In conclusion, I wish you good luck in the correct execution of instalments or loans! Panora can help you compare bank’s offers!