How does 0-0-12 installment plan work?

The concept of an installment plan

In short, an installment plan is a method of purchasing goods in a store with monthly or weekly payments.

Please note! Although many online stores offer installment plans with no down payment, under the terms of some companies, you can purchase promotional goods after making a payment equal to 20 – 30% of the item's value.

There are two options for providing an installment plan:

1. With a classic installment plan, the buyer can purchase goods without a down payment and overpayments. That is, if a TV costs 20,000 rubles, the final amount will equal this figure. The client concludes a sales contract directly with the seller, and the store makes the decision to approve or reject the application. The sales contract specifies the cost of the product, the final payment deadline, the amount of payments to be made, and the type of purchase (online or traditional purchase). If the buyer misses even a single payment, the seller has the right to demand the return of the goods.
2. In most cases, we are dealing with the so-called sale of goods on credit with installment payment. In this case, the contract is concluded not with the seller (store), but with a credit company (bank or IFC). When applying for this type of installment plan, there is interest, which is usually included by the seller in the total cost of the goods and spelled out in a fixed form in the credit agreement. Despite the fact that you conclude the contract on the seller's premises, the financial institution makes the decision whether you will be issued the promotional goods or not.

Both "classic" and "credit" installment plans have a lot in common. First, the payment is spread over 12 months in our case. Second, the collateral is the item you are purchasing. Third, payment is made over the course of 12 months in equal installments.

Banks also offer installment cards for purchases. This is a payment instrument that allows you to buy promotional goods. A specific installment period is set for each purchase, during which the "credit" must be repaid. The most popular cards are: Halva from Sovcombank, Platinum from T-Bank, Sovest from Qiwi Bank, and Svoboda from Home Credit Bank.

It is important to understand that an installment plan involves two parties: the seller and the buyer. If a bank gets involved, the buyer is actually taking out a targeted loan rather than an installment plan, and payment is made to the creditor's account.

Unlike a loan, an installment plan is available to any buyer who does not raise suspicions with the manager. To get a loan, the borrower must meet certain requirements (age, length of employment, income certificate). Nothing of the sort is required if a client purchases goods on an installment plan. The only document needed is a passport, and the agreement is drawn up based on passport details.

The consulting company FrankResearchGroup conducted a study for 2017. It published information that approximately 9 million goods were sold to consumers that year through installment plans or loans.

What is the catch of the promotion?

The main catch of the promotion lies in the fact that instead of a classic installment plan, you get a targeted loan. For online stores that cannot verify a customer's creditworthiness, offering goods on installment is a major risk. Unscrupulous buyers might not return the money. Therefore, to protect themselves, stores enlist the help of credit organizations.

There are other catches as well.

Insurance

"Once I saw an ad for 'Sofas on a 12-month installment plan'. It caught my interest, and I went into the store to find out the purchase terms. 'Yes, we have an interest-free installment plan with no down payment, but it can only be arranged together with insurance,' was the seller's reply."

In other words, buying a sofa under these terms is just like taking out a loan to purchase it.

In our country, insurance is a voluntary service and can be declined, but I made a matter of principle out of not doing so.

Price increases

Large digital and home appliance stores raise product prices before launching a promotion. In other words, a loan interest rate may be included in the cost of household goods.

Good to know! To make sure you are not being deceived, check the price of the appliance you are interested in at other online stores.

Additional conditions

You may see in the agreement that the price of the item does not exceed the original amount only if you do not purchase additional services. But banks most often create conditions without which purchasing this item is unrealistic.

As additional services, they sometimes offer free credit card issuance, SMS notification services, etc.

The store may offer an installment plan on the condition that you purchase goods for a certain amount—another catch.

Upon completion of the transaction, stores often offer to arrange an additional warranty that extends the warranty period of a TV or juicer by 3 to 4 months. However, the buyer must pay 10 to 20 percent of the item's cost for this extra warranty.

Lack of discounts

When buying goods on an installment plan, you can forget about discounts. For example, when buying an iPhone at an M.Video store on "credit", you cannot use bonus rubles, coupons, promo codes, or gift cards. The "Best Price Guarantee" program is not for you this time.

That is, every store dictates its own terms, so before buying gadgets or household appliances, clarify all the details with the sales consultant.

Some buyers think that if they have arranged an installment plan, they do not need to stick to the payment schedule. The main thing is to return the money on time. Valentina found herself in precisely this situation. "When we were getting a refrigerator, the store manager convinced us that an installment plan is not a loan. Therefore, we paid when my husband received his salary. Since the bank didn't send reminders, we missed a payment once, for which we were charged a fine," the woman recounted.

Fines and penalties

When arranging an installment plan, you enter into an agreement not with the online store, but with a credit organization. To stay in good standing, strictly follow the conditions specified in the agreement and make payments on time. For any violations, the bank will calculate fines and penalties. Their amount is specified in the agreement—pay maximum attention to this clause.

Please note! Information about any payment delays is transmitted by banks to credit history bureaus. If your history is ruined, it will be difficult to get a loan from Pochta Bank, Sberbank, or T-Bank.

Stores offering 0-0-12 installment plans

There are several stores that offer installment plans with no down payment for 12 months and no overpayments.

• DNS is a digital and home appliance store. Here you can buy smartphones, home appliances, computers, accessories, power tools, and garden tools.
• Citilink is an electronics discounter offering Blu-Ray players, FM transmitters, MIDI keyboards, car stereos, and other goods under promotions.
• OZON is an online store where you can buy electronics, home appliances, or children's goods on an installment plan.
• Eldorado offers goods under the 0-0-12 scheme with home delivery or pickup.

You can also purchase a TV, refrigerator, phone, or vacuum cleaner at other stores. Snow Queen, M.Video, ISTNOVA, and RBT.RU will be glad to welcome you among their customers.

Please note! Every seller has the right to run a one-time promotion or sell goods on an installment plan on an ongoing basis. Some stores simply extend the promotion after its expiration date.

What is the benefit

Why 0-0-12 installment plans have become so popular lately is a question asked by many buyers. We have looked into this issue and are sharing the information we gathered with you.

Did you know? There are interest-free 0-0-12/24/36 installment plans.

For the store

The store receives significant benefits, as the 0-0-12 scheme helps not only to increase sales but also to sell stagnant stock. Sergey, who visited Eldorado, might never have purchased an expensive plasma TV and thus would have deprived the store of a profit. But he sees the ad "Take now, pay later." It works. Just a few hours later, the coveted plasma is in the bedroom. True, he will have to pay a hefty sum for it over the course of 12 months.

In addition, by cooperating with banks, it is more profitable for stores to receive a specific amount immediately and put it into circulation than to wait 12 months for the buyer to return all the money.

For the buyer

By arranging an installment plan, the buyer also benefits. For example, you urgently need to buy a washing machine, but you don't have the money. Going to the store, taking the appliance, and paying a certain amount over 12 months is more profitable than taking out a bank loan for the washing machine or buying it with a credit card. Non-targeted loan interest rates range from 15 to 20% per annum, credit cards up to 40% per annum, while installment plans are up to 1.0% per annum. At the same time, the overpayment is compensated by the seller, not the buyer.

Another benefit is the long lending period.

Olga has a fairly large sum in a deposit and a good salary, but she constantly buys expensive appliances on an installment plan. 20% of her salary goes toward covering the "loan", and the rest of the funds are for living expenses. It turns out just like the saying: "The wolves are fed and the sheep are safe." She has a deposit that regularly earns interest, as well as appliances and money for living expenses.

For the bank

The benefit for the bank is obvious. This is a kind of regular loan, except the interest is paid by the store, not the buyer.

The system works approximately as follows:

The price of the household appliance on the website is 60,000 RUB (this is for the buyer). The client arranges a 12-month installment plan and regularly pays 5,000 RUB. As a result, there is no overpayment. Looking deeper, one can see that the store gives the bank a discount of about 20%. In essence, the client buys the product for 60,000 RUB, but this amount already includes an extra 12,000 RUB as interest.

A summary list of pros and cons looks like this:

Pros:

• the consumer can purchase goods without having the necessary amount;
• even if you haven't paid off the loan yet, you can use the purchase;
• no interest.

Cons:

• no discounts;
• large monthly payments for expensive purchases;
• the temptation arises to buy other goods on installments.

Installment plans can be arranged both online and in regular supermarkets. The procedure for buying a smartphone on installments in a regular store looks like this:

• The buyer selects a gadget.
• The salesperson writes out a receipt and gives it to the client.
• The buyer takes the receipt to the credit manager's desk.
• The manager informs the client and prints out the payment schedule.
• If the buyer is satisfied with everything, the application process begins.
• The data provided by the client is sent to the bank.
• After a positive decision, the contract is signed.
• The store provides a sales receipt and a warranty for the smartphone.

To summarize, we can say that a 0-0-12 installment plan is beneficial for all parties: the seller, the buyer, and the store. The main thing is not to make mistakes during the application process.

• Before signing a loan agreement, read it carefully, paying attention to small print and footnotes. If there are unclear clauses, ask the consultant a couple of questions or set the agreement aside. Return to it in a couple of hours or the next day.
• Choose convenient repayment periods. Ideally, 3 to 4 days after your payday.
• Check the payment schedule. The total sum of payments must equal the price of the product.
• Opt out of unnecessary services. For example, you can decline insurance and SMS notifications.
• Compare prices for goods in other stores. This will help you see whether the price of household appliances or electronics in a given store is inflated.
• Consider whether purchasing additional services is worthwhile. If you set reminders yourself, there is no point in paying for SMS notifications.

And finally, remember: an installment plan is not an easy way to get what you want. These are obligations that fall on your shoulders. To avoid overdue payments, set reminders on your mobile phone, stick reminder notes on your fridge, or set up auto-payments.

As you can see, installment plans have both pros and cons. Whether to buy goods from stores offering split payments or skip this option is up to you. The choice depends on how much money you are short for the purchase and how much you are ready to pay each month.

This is interesting! There are several countries where installment plans are popular. In Kyrgyzstan, people mostly buy TVs and phones. In Kazakhstan, fur coats and home appliances. In Belarus, people buy everything on installments: furniture, appliances, clothing. The average ticket size is about 2,000 USD.