What questions to ask yourself before financing a purchase?

Today there are few things that cannot be paid in installments. With credit cards, with fast bank loans, with the financing offered by the stores themselves … The financing options are practically endless, explains the credit comparison tool HelpMyCash.com. Thanks to these options you can purchase large-value products and pay for them in affordable monthly installments, even from 12 euros per month. Nevertheless, This ease of paying everything in installments has the danger that you could end up spending more than the account or that the interests could skyrocket. So, How far is it advisable to borrow? How do you know when it goes from being an advantage to a danger?

Paying in installments is not a bad thing; in fact, it can be a great tool for certain purchases, but You have to know how to distinguish in which purchases are worth paying more for the ease of dividing them and in which not. For this, there are five questions that it is advisable to ask yourself before each purchase that you want to finance.

Is the purchase worth financing?

The first point to evaluate before making any purchase is to decide whether it is worth financing or not. It is always advisable do not do it in regular purchases and save this tool only for large purchases.

Thus, it is never a good idea to pay expenses such as grocery shopping, bills or daily transportation in installments. Instead, it can be a great tool to buy a laptop, a motorcycle or make a reform.

What is the right product?

There are a large number of types of credit that can be used to pay for purchases in installments. Each type of financing will have specific characteristics and conditions. Therefore, depending on the purchase, it will be essential to choose well what type of credit will be used so that it is cheaper.

For example, for purchases with a credit card in any store, the WiZink Plus credit card, free and without changing banks, offers to finance one-off purchases for three months without interest and with a commission from 2.5 euros, and the You credit card, also free and without changing banks, allows pay for purchases in up to seven weeks without interest, a good formula to pay later without interest.

On the other hand, if you want to finance a large project together with another person, the Cofidis Direct Credit, with which you can get up to 4,000 euros without changing banks, lowers the APR if there are two holders, decreasing from 24.51% to 22%, and if you are looking to renovate the kitchen, Ikea offers free financing to be returned in up to five years for this purpose.

Is a low fee always advisable?

It is very common to choose a very low fee, since it is much more comfortable. But a low monthly payment will take a long time to pay off the debt. Sometimes it will even continue to be paid when the financed product is no longer used. HelpMyCash experts recommend that the time it takes to refund an installment purchase is always less than the useful life of the product.

For example, if you want to finance a mobile, you should take into account that it is likely that in two or three years it will no longer be used. Handle, the duration of the payment of the phone must be shorter than the time of use of the smartphone.

How much of the salary is spent to pay debts?

One hundred euros to pay for the laptop, 30 euros for sales purchases, 60 euros for new furniture … It is easy that, suddenly, putting together all the small purchases that have been financed it is seen that a large amount is being paid together. The key to avoiding over-indebtedness is to check whether the set of all deferred payments exceeds 30% of income.

In this way, if 1,500 euros are charged per month, no more than 500 euros should be spent on all the installment payments, including large loans such as the car or the mortgage.

If this recommended ratio is exceeded, it is best to eliminate debts before starting a new financing.

How much will it cost in total?

This last point will help you assess how much you are willing to overpay in exchange for not paying at once. So, you must know how much will be paid in bad, that is, how much will be paid in interest and commissions to decide.

For example, if you finance a 400 euro washing machine and you pay a total of 60 euros in interest, it may be interesting to avoid paying it all at once. Instead, if you have to pay 200 euros in interest, half the value of the washing machine, it may no longer be worth it.

This limit to know whether it is worth it or not should be set by each person based on what they need, the product and their ability to pay for it at once or not.