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Installment Loan Or Buy At Once: What To Choose For Expensive Purchase

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The modern era of new technology and the rapidly developing world makes people strive for new items that come out each year. We want to purchase the latest phone, the newest car, or the trendiest clothes. Should you take about 2500 loan of financing such big-picture purchases? Is it better to pay with cash or take out an installment loan and repay it in parts? Should you save cash or borrow money now? There is no one-size-fits-all answer to these questions. 

Let’s dive right in and try to value all the pros and cons of each financing option to help you make a smart choice.

Benefits and Drawbacks of Getting Installment Loan

Getting a small loan is the cheapest way of financing a big-ticket purchase if your credit rating is decent. If your credit history is good enough you may qualify for installment loans online to buy anything you want but can’t afford right now. You may choose among several service providers to get the lowest interest rates and more flexible terms of the loan agreement.

The research by the Pew Charitable Trusts has revealed the fact that the payday lending model is unaffordable for the majority of borrowers as it leads to more debt in the long run. The installment lending model is more preferable and affordable for consumers. 

The Consumer Financial Protection Bureaus (CFPB) proposed a regulation that requires lending companies to allow installment repayments. As a result, borrowers have a more flexible repayment schedule and make equal monthly payments instead of one lump sum.

Pros:

  • you can own the item/auto/piece of equipment outright
  • you may sell this item later if needed
  • you may obtain an installment loan online or over the phone
  • the loan will cover the whole amount
  • you can be offered competitive rates
  • it’s the cheapest lending solution speaking of the total cost

Cons:

  • you may need to wait a couple of days to get the money into your bank account
  • monthly costs may be higher
  • it may affect your credit history 

Benefits and Drawbacks of Paying a Lump Sum

What if you don’t want to take this burden on your shoulders? You may avoid lending options in case you can afford to make a lump sum payment from your own pocket. This idea can save you money in the long run as you won’t need to pay any interest or fees. 

On the other hand, you should be prepared to utilize the cash from your savings account or emergency fund. If you need to buy new clothing, electronics, furniture, equipment, or fund your vacation, you may pay in a lump sum as well.

Using your own savings can be beneficial when you still have an emergency fund that remains stable. While you may need to make an expensive purchase right now, you never know when the next financial trouble might happen so you always need to have some cash set aside for unforeseen situations. 

If you don’t have a separate savings account and emergency fund, it may make more sense to gradually repay an installment loan as you steadily earn more money.

Pros:

  • you don’t have to follow the loan agreement or worry about its terms
  • there are no monthly payments and no interest rates
  • you own the item/vehicle/equipment straight away
  • it won’t be recorded on your credit report
  • you won’t pay more than the item is worth

Cons:

  • your choice may be limited by the price of the item/equipment you can currently afford
  • you may want to buy a cheaper option to save your funds
  • it won’t improve your credit history
  • you need to have a lump sum right away 

What Financing Option Should You Choose?

So, let’s get it straight. The solution you choose depends on your personal financial abilities and the current situation. If you are offered a discount or a special price and you have enough cash to fund the needed purchase, go ahead and pay for it. 

Having money on hand means you can own the item or equipment straight away without having to worry about monthly payments and interest rates. This solution is preferable for situations when you don’t urgently need to make this purchase. If you can wait until you save enough or negotiate a lower price, it may be a sound decision.

If this is an emergency and you can’t wait, it’s better to obtain an installment loan and fund your immediate need. 

For instance, if your washing machine has just broken down and you haven’t saved enough for a new one. You won’t be able to wait too long as you need a new washing machine right now. So, getting a lending solution may help you avoid stress and gradually repay the debt in equal affordable payments.

Conclusion

You should evaluate all the pros and cons of each financing method. Decide how fast you need the new item or equipment. If this is an urgent case, you may need to take out a lending solution.

If you can wait and save enough, you may avoid debt and borrowing options. The choice is yours. If you request an installment loan make sure you have a repayment plan and have a steady source of income.

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