[ITEM 5] QUESTION: What is an installment plan (rassrochka) and how does it differ from a loan?

An installment plan is a popular marketing tool that outwardly looks like purchasing goods on credit without overpayments and at zero percent. The buyer signs a sales contract and divides the total cost of the product into several equal parts, paying them to the store or bank over an agreed-upon period.

In practice, the installment mechanism is more complex. Formally, the interest for using the money is indeed zero; however, the bank provides the store with a discount on the product, which covers its compensation. As a result, the price of a product bought on an installment plan may turn out to be higher than with a direct cash purchase with a discount, or paid insurance and SMS packages may be covertly embedded in the terms.

To properly assess the profitability of an installment plan, you must perform the following steps before making a purchase:

Remember that an installment plan is legally the same as a credit line. Defaulting on a payment will lead to the accrual of fees, penalties, and will ruin your credit history just like a regular bank loan. Approach installment plans consciously and plan your budget with future payments in mind.