loans 1

Question 1

Pro of Installment Payment

Answer 1

recieve a product immediately, pay later.

Pro: get product right away.

Question 2

Con of instalment payment

Answer 2

High interest rate: 10-15%.
Hidde costs ‘interest fees’ involves a consumer paying a setup fee instead of interest.
Effective interest rate - how much more one pays when buying in installment compared to paying upfront.
Cheaper to simply buy the product upfront.
Smarter to take a bank loan.

Question 3

Credit Card

Answer 3

(15% interest) extra card. Temporarily spend more than what’s on your account.
You recieve an invoice, if paid on time nothing is charged.

Pro: cheap form of loan.
Con: if invoice is not paid on time, could lead a debt trap: making you borrow new loans to pay existing ones.

Question 4

SMS loans

Answer 4

offered by credit institutions (companies whose buisness idea is to lend money on short notice). You get the money within 15 minutes.

Few or no collateral securities. Short loan terms.

Cons: individual with payment remarks could borrow. 40% interest can easily turn into thousand of percent in effective interest if unable to repay.