Buying on installment with 0% interest - sounds attractive, right? It was introduced about a decade ago, initially making customers feel skeptical. 0% installment means you can pay a part of the item, own it for immediate use, and then pay a small regular amount each month until it's fully paid off. This amount does not incur any interest. It feels like the buyer has nothing to worry about. You can own what you need with a very small initial payment, and the total value does not exceed the original price. Quite a bargain, isn't it?
True to its name, buying on installment with 0% interest means that customers purchase goods and borrow to pay for them without incurring interest during the installment period. However, typically, you must pay a certain amount upfront to the business, usually between 20% to 30% of the product price, with the remaining amount divided equally to be paid monthly. For example, if you buy a phone priced at 15 million VND, the store allows you to pay 20% upfront, equivalent to 3 million VND, and the remaining 12 million VND is paid gradually over 6 months, with 2 million VND paid each month.
In reality, to make this happen, the seller will partner with a credit institution. Before the installment, you must provide documents such as your citizen ID, declare personal information like name, address, workplace, salary, and information about relatives to ensure you won't default on the seller. The amount you pay in installments is essentially a loan from that credit institution. At this point, everything seems fine. And you may wonder why they do this. Of course, sellers wouldn't want to incur losses. This is a marketing strategy aimed at competing to attract customers, targeting the psychology of wanting to spend little money but own and use the product immediately, creating a sense of a great deal.
The tactics that sales consultants often mention are that this product, even if it depreciates later, you will still have to pay the original price without any additional costs.
0% interest installment loans were born thanks to the profit-sharing partnership between financial companies and retailers. Manufacturers and retailers realize that by collaborating with financial companies for 0% interest loans, the profit on each product may decrease slightly, but they can sell many more products. Ultimately, launching a 0% interest installment purchase program can help retail businesses stimulate demand and save costs. With this method, businesses can attract a large number of customers, increasing revenue, especially in today's fiercely competitive economic environment. This is because they invest in opening many stores or expanding their business scale.
Moreover, the costs to operate a store are not small. Rent, employee salaries, utilities, etc., allow businesses to reduce operational costs. More importantly, instead of conducting many discount campaigns with products that may not be useful to customers, the gradual, interest-free payment method will better hit the psychology and actual needs of customers. Once businesses need to reduce costs, including operational, marketing, or promotional expenses, even selling products at the old price will yield more profit. In reality, the funding support when selling on installment is directly pumped from financial companies, allowing businesses to save quite a bit on costs.
When a sale is made, the retail business will allocate a portion of its profit to the financial companies. Besides profit, financial companies also gain new customers, who are shared customers of both the retail business and the financial company. Thus, it is clear that when collaborating, both the financial company and the retail store benefit, not only increasing the customer base but also boosting sales and market share. This is a rare Win-Win model, where all three parties benefit, but there are hidden costs that we cannot know or recognize. Unfortunately, most of the disadvantages always lie with the customers, the ones who spend money to buy products.
Some financial organizations and sellers intentionally create vague conditions to deceive customers.
Firstly, they intentionally inflate the product price higher than the general market price without informing you. For example, a regular phone priced at only 15 million VND can be pushed up to 16 or 17 million VND through this 0% installment method. When consulting, they focus only on the benefits of this interest-free installment, distracting consumers from thoroughly checking prices. Additionally, in some cases during the installment process, customers may incur extra costs such as collection fees or insurance fees, but these are not detailed during the consultation.
For installment purchases, the store is the one drafting the contract and usually does not provide specific advice but only states the monthly payment amount. After a few months of payment, the buyer may realize that the total payment is much higher than the actual product price but cannot stop because they have already signed the contract. Therefore, buyers need to understand the amount to be paid each month, the duration, and the payment method before signing.
Secondly, buying on installment is essentially purchasing from business A and borrowing money from credit institution B to pay, then gradually repaying B. Therefore, the borrowing procedure is quite complicated; besides the identification documents, you must have a citizen ID, household registration, and the borrower will need to declare personal information such as name, address, workplace, salary, payday, especially information about relatives and friends along with phone numbers for verification. Sometimes, this information can be quite sensitive and easily leaked for malicious use, or in some cases, some sellers sell customer information to third parties for profit.
Thirdly, you may incur heavy interest if you are late in repaying the loan according to the schedule. When buying on installment, customers can pay via online transfer or by going to pay directly each month. If you forget and do not pay attention to the late payment terms, you may face very high late fees, sometimes reaching 20% to 30%. And what if you cannot repay the debt or intentionally ignore it? Of course, it is not easy to escape; when customers are late, they will face high penalties and may be troubled by debt collection day and night. First, there are reminder calls and messages, and when they cannot collect the debt, financial companies will hire third parties to collect the debt on their behalf.
In reality, many customers have reported being collected from debts through intimidation, even defaming the debtor's honor on social media, and even relatives and friends of the borrower may share the same fate with baseless accusations. This greatly affects your life; moreover, promotional offers accompanying products may also be cut off. If customers buy products under the installment method, however, when consulting, the seller only emphasizes the benefits for the customer without clearly stating the unfavorable information for the customer. Only when customers demand details about fees or penalties do they realize the hidden costs, and customers need to understand the contract's obligations regarding rights and responsibilities to avoid falling into situations where they incur penalties because the preferential interest rate only applies for a few initial payment periods.
If customers are late in payment, the interest rate they must pay will be high, with many customers facing interest rates of up to 50%. Nowadays, consumer loans with 0% interest are booming across various sectors as a way to attract customers in today's fierce competition. In reality, it is not bad at all if all parties are completely honest with each other, as it can bring benefits to all three sides: the seller, the lending credit institution, and the buyer. Previously, 0% interest loans were mainly applied in the electronics sector for small to medium-value items, but now it has expanded to other areas such as motorcycles and even high-value items like cars.
We often hear that nothing is free, everything has its price, and buying on installment with 0% interest is no exception. Before blaming financial organizations and sellers for intentionally creating traps, as smart customers, we must thoroughly understand the contract and each term before participating in this program, asking the consulting staff to clarify the following issues: all types of fees that need to be paid, how long the 0% interest rate lasts, whether it applies to a few installments or the entire installment period, the number of days allowed for late payment without incurring additional fees, and what the penalty interest rate is for late payments.
During the installment period, if the product encounters issues, how will it be handled? Your money is entirely yours, and you can do whatever you want with it, so do not let your hard-earned money go to waste. Getting wet in the rain is unavoidable; 0% interest installment is not bad at all. The important thing is to know which way to shield yourself from the rain, meaning you must thoroughly research before deciding to use this offer in a way that fits your payment ability, making yourself comfortable instead of bringing trouble upon yourself. Have you experienced this 0% installment method yet? Please share with us.