Using Financing Services
By Thean Sargeant
Published on: September 6th, 2024
Financing services have become even more common when it comes to helping customers to pay for their purchases. Many retail companies have partnered with financing services like Klarna, Paybright/Affirm, and Afterpay.
Such partnerships benefit companies as they increase sales and help you by allowing you to pay a set amount over a set period. The most common payment periods are bi-weekly and monthly. Here are a few tips to consider before using a financing service.
Think things through before Buying
It’s easy to buy something you see and want on impulse. Before you add an item to your cart and checkout, take a couple of minutes, days, or even weeks to determine if you need to get the item/product. Even though you can put it on a plan, think about whether it’s something that you need to use a financing service for.
Know if you’ll be able to pay each Payment
Financing services use different forms of deposits. If you’re using your debit card, make sure you have enough on your account to pay. If you’re using your credit card, make the payments on your credit statement.
Save for what you can
If you can, wait and save your money for any items. You’ll be able to pay for your investment in one go without worrying about broken-up payments. You might also be able to catch sales during that waiting period.
If you’re still thinking about using a payment plan, consider these pros and cons:
Pros
You may not have enough money for something you need or want.
Let’s say you move and need a bed but don’t have enough to buy one right now. Using a financing service can be helpful in this situation. You can get your bed and pay it off later. Only do this if you know that you can make the monthly payments.
You may not want to pay for somethingInstantly
Some people prefer to make smaller payments over time than pay everything all at once. If this sounds like you, remember to have money ready for the payment dates when using a financing service.
Finance a big Investment
Some products are necessary but come with a hefty price tag. Items like cell phones are high in price and even higher in necessity. Financing one could be a good idea if you don’t have the money to buy one outright. Once again, do this if you know you can make the payments.
You can always pay the remaining amount early, and you should if you can.
Cons
Pay fees on late payments
As attractive as these plans may sound, missing a payment comes with a fee. While some fees aren’t too high, they are still an outside cost you’ll have to bear.
Pay more for anItem
Some payment plans charge interest for using their services. This carries up the amount you pay for an item as you must now account for an extra cost. If this isn’t in your budget, consider saving and trying to get the item another time or while it’s on sale.
Can increase credit card debt
If you use your credit card to pay for a financing service but don’t pay off that charge, you’ll be charged interest from your card company. This would be another cost you must factor in when you’re making a budget to repay your debts. Likewise, if you choose to use your debit card and don’t have enough money to make a purchase, the financing service can still take money from your account and put it into overdraft. Any overdraft fee your bank charges becomes an expense you must now pay.
Remember that people are in debt to companies that offer financing services, because there’s no such thing as free money. If you find these types of services helpful, use them wisely.