What is an installment plan? How do you apply for one and fast-track your approval? Here, we answer all your questions and give you everything you need to know about getting an installment plan.
Q: First things first: what is an installment plan?
An installment plan is a unique payment method that allows you to get an upfront purchase (buy now) and repay it in several “gives” spaced across a set schedule (pay later).
This payment method is increasingly becoming popular nowadays and it is easy to see why.
Installment plans provide flexible payment terms for both planned and unplanned big-ticket purchases. It also applies to both long-term and short-term purchases.
Q: How is your payment calculated?
For the most part, payments are computed using the following factors:
- Your overall installment balance
- How long you want to pay for your plan
- Interest rate (if any)
- Penalties (if any)
Payments for an installment plan are considered as regular, meaning the amount you pay – say, every month – is fixed for the entirety of your contract.
Here lies one of the biggest advantages of an installment plan: it is easy to plan ahead and adjust your budget around it.
In contrast, your credit card payments may vary. Factors such as how much you spend using your card or any previous balances or penalties will affect the amount of your monthly payments.
For beginners or first-time loaners, an installment plan is definitely more recommendable than a credit card. Aside from its flexible payment terms, it also gives your budget more room to breathe as its interest rates (if any) are more forgiving than that of a credit card loan.
Q: How does one apply for an installment plan?
There are various ways to apply for an installment plan depending on the company providing the terms.
Generally speaking, however, the process involves the following:
- Filling out a form
- Submitting required documents such as proof of income, proof of billing, and/or valid government IDs
- Having your credit background checked
Filling out application forms usually involve giving your personal information such as full name, age, address, and source of income to the lending company.
Submitting the necessary documents not only provide for more detailed information but also serves as verification for the information you provided via the application form.
Credit background checks often sound scary but they are necessary. It is a standard operating procedure that allows lending companies to verify if you are capable of paying the installment plan you are availing.
Q: How do I ensure my application approval?
Unfortunately, there can be no 100% guarantee that your application will be approved. In fact, you ought to be suspicious if a lending company promises you a guaranteed approval (more on that later).
There are, however, several ways you can fast-track your application and increase chances of approval:
- Maintain a good credit score
- Submit complete documents
- Fill out the application form as accurately, honestly, and completely as possible
Maintaining a good credit score means paying your bills and other loans (if any) on time. With a credit background check, it is easy to spot who is a good payer or not.
Don’t worry, it is only natural that lending companies will prioritize the application of a good payer and defer (or reject) those that are not. This means they care about their processes and would like to keep everything in order.
Incomplete application forms will also slow down your approval process.
In some cases, you will be required to finish your application form first before your account will be considered for the next step of the approval process. Don’t let your account get deterred by this! Same can be said for providing the required documents.
Q: What is a 0% installment plan?
As mentioned earlier, installment plan payments are calculated via the amount of loan, its duration, and the interest rate provided by the bank or lending company. The interest rate can go as much as 1% to 5%, depending on the provider.
Interests, no matter how small can mean a huge deal when it comes to repayments. When compounded (through late payments) or increased, they can put a significant dent in one’s budget.
The good news is, there are companies that can provide a 0% installment plan for your purchases. This means that if you borrow ₱12,000 on a 12-month duration, you will only have to pay ₱1,000 every month – not a single centavo more!
Provided, of course, that you adhere to all terms and conditions stated in your installment plan contract.
Q: Are there any companies in the Philippines that can give me a 0% installment plan?
Yes, there are plenty!
Most banks in the Philippines provide 0% installment plans to their customers. Terms and application processes differ from bank to bank, so you might have to read up and seek out which bank will give you the kind of deal you need.
Q: How do I know a lending company is legit?
There are few things you can look for when determining the legitimacy of a lending company.
A legitimate lending company is easy to find. Ideally, they have a physical office and, a working, responsive customer service hotline.
In this day and age, any legitimate company should also have a fully-functioning and secured website as well as social media accounts.
Legitimate lending companies also employ a reasonably strict verification process.
They perform credit checks and offer installment plans that have clear terms and conditions. Do make sure to thoroughly read these conditions before signing. If necessary, have a lawyer go through them beforehand
Q: How do I spot scammers and loan sharks?