Advantage and disadvantage of installment schemes as points
Answers
Answer:
Advantages of instalment schemes :-
• Instalment scheme is a boon to most of the meagre income group. This scheme is specially designed by the companies to lift the living standards of low income group. If a person who earns meagre income and wants to give good facilities to the family or achieve some of his dreams,these schemes help him a lot.
• These schemes let you pay for the things you can not afford or don't have all the money for buying those things. We can decide the cost over a greater period of time to avoid taking the full hit in a month.
• We also have the option to pull out before we have paid the full amount.
• Cheaper than a personal loan.
• Maximise profitability
• Minimal sales task
• Fixed rate
• Provides exit options.
• One can own several things even though they don't have enough money.
Disadvantages of instalment schemes :-
• Instalment schemes are loans on which the borrower has to make monthly principle and interest payments.
• The rate of interest can change any time and if it becomes more,it will become a burden to the payer.
• Instalment loans have larger monthly payments.
• Instalment loans mean long term commitments. A lot can happen in this long-term,at may make us regret of opting these schemes.
• This instalment system makes people extravagant. They get addicted to the habit of unnecessary borrowing which makes their lives tense with unrest.
• Buying things on instalment traps permanently in debt.
• It forces payers to borrow money from some others to pay their monthly instalments. This becomes a cycle of borrowing - paying - borrowing.
• More expensive than actual cost.
• Higher fixed cost per month
Hope it helps!!
ANSWER ;
Advantages of emi
1. freedom to buy: an emi option allows you to buy expensive items right off the shelf, even though you might not have the funds to pay for it at that very moment. for instance, if you're a salaried person, buying your dream home or car is easier with an emi option with your loan, as compared to a lump sum repayment.
2. affordability: be it expensive household items, a vehicle, gifts or even a house, emis can help you buy anything and everything. your lender divides the total amount in monthly instalments, and you pay it off in manageable chunks.
3. easy on the wallet: since the monthly payment is already known and distributed over the loan tenure, the emi option will not burn a hole in your pocket, therefore allowing you to make other investments and spend elsewhere too.
4. plan payments with emi calculators: emi calculators available online will allow you to calculate your monthly outflow depending on the principal amount, interest rate charged, and time horizon. planning for other expenses and investments out of your income can be done easily.
5. leverage flexible emi options: several banks and financial institutions now offer flexible emi schemes. here, the lender allows you to decide on the amount per emi or the payment duration, depending on your financial standing and income.
6. no mediators: the emi is directly paid to the lender, and there is no involvement of multiple parties handling your payments.
Disadvantages
1. longer debts: emis are designed to significantly extend the loan period, leading to you carrying the debt for longer.
2. higher repayments: say you want to buy a smartphone today at rs. 55,000. if you opt for emis, you will end up paying more than the cost at the end of your repayment period. the excess amount reflects the interest charged by the institution for the use of their funds. to avoid paying higher than your upfront purchase cost, you might want to look for a zero-interest emi scheme.
3. no prepayment: even if you have the ready cash to pay off the loan before the tenure ends, most emi schemes will charge you a prepayment penalty ranging between 2-3% of the principal amount.
4. charges on skipping emis: for a customer, missing the emi or defaulting on payments may have significant implications. in case of home loans or car loans, your lender is legally entitled to take over the mortgaged asset if you regularly default on payments.
5. impact on creditworthiness: also, skipping emi payments will negatively impact your credit score.
6. extra costs: apart from the interest cost, financial institutions might also charge a processing fee when you opt for an emi scheme.