Everyone who uses a credit card is definitely familiar with the term "0% installment". Some people are interested in applying for a credit card specifically to take advantage of this installment option. The ability to pay in 0% installments makes it easier for us to decide to purchase various products, as we don't have to pay the full amount upfront but can instead spread the payments over the specified months. This encourages even those who have never used a credit card to start using one, as it can help manage expenses. However, starting to use a credit card also means taking on the risk of debt. If we maintain good financial discipline, we shouldn't have to worry too much. But if our financial habits are poor, we might need to be more concerned, as debt can start to creep up on us. Therefore, when using a credit card, we should have good financial discipline in repaying as well.

           Additionally, there are various details to be cautious about regarding 0% installments. Today, MoneyGuru.co.th has compiled this information for you so you can understand whether 0% installments truly make spending easier. Let's take a look at what to consider.

Before opting for 0% installments, make sure to check if the 0% interest is genuine.

           Nowadays, almost everything can be purchased on installment, and 0% installment promotions are constantly available. Especially as the New Year approaches, these offers are frequently seen in various stores looking to boost sales. However, before making a purchase, we must not forget to check if the 0% installment is indeed genuine. Sometimes, it might actually be 0.80% installment, which means there is interest involved, albeit at a low rate. But for high-priced items, even 0.80% can add up significantly, as shown in the calculation example below.

Example Calculation for 0.80% Interest Rate

  • Item price: 25,000 THB
  • Installment interest rate: 0.80% per month
  • Installment period: 10 months

Monthly payment amount: 25,000 / 10 months = 2,500 THB

Monthly interest payment: 25,000 x 0.80% = 200 THB

Total monthly payment (principal + interest): 2,500 + 200 = 2,700 THB

After 10 months, total cost including interest: 2,700 x 10 = 27,000 THB

Total interest paid after 10 months: 200 x 10 = 2,000 THB

(Thanks to information from: Tesco Lotus)

           From this example, it's clear that there is a significant difference in what we have to pay between 0% and 0.80% installments. Therefore, it's essential to check carefully before making any purchase to avoid regret later.

How many months can you pay in 0% installments?

           The duration for which you can pay in 0% installments depends on the promotion you are interested in. Typically, the installment period ranges from 3 to 12 months. However, it's important to check whether the 0% applies for the entire installment period. Some products may only offer 0% interest for a promotional period of 3 or 6 months, especially for high-value items like houses or condos.

           This can be a significant trap because high-value items often come with high interest rates. Thus, having a short period without interest can make it easier for us to decide to buy. The catch is that while we don't pay interest initially, once the promotional period ends, we will still have to pay the remaining interest until the total amount is fully paid off.

Does 0% installment mean longer payment terms?

           Certain products may require longer payment terms if they involve 0% conditions, such as cars with 0% down payment promotions. If we buy a car under this promotion, it will result in higher monthly payments and longer payment periods. This extended payment duration will also lead to higher interest payments because we are not making a down payment.

           In comparison, purchasing a car with a down payment typically results in lower monthly payments and shorter payment periods, as well as lower interest rates, since we have already paid a portion of the car's cost upfront. However, the downside of making a down payment is that we need a substantial amount of money to do so. For those who do not have this lump sum, financial institutions offer 0% down payment promotions to accommodate this need.

Ultimately, if we calculate the interest, we will find that buying a car with a 0% down payment can lead to paying more interest than if we had made a down payment.

           We hope that the three points we presented today will help everyone choose 0% installments that truly make spending easier. And importantly, don't overextend yourself beyond what you can afford to pay, or else debt will come knocking.

Thanks for the information from www.moneyguru.co.th