The popularity of paying in installments has seen acceleration in the last few decades. Most people still associate installment purchases with their ease of buying a property. This is one of the reasons why people prefer installment payment over full payment at the spot. The installment payment for buying property has become a normal and a common method for a lot of investors and soon-to-be residents too. Banks also provide loans on such design that the debtor can purchase their properties with installment plans. Buyers can then easily pay a down payment and pay the rest in installments overtime periods. The idea is that lenders and creditors earn from even the low amounts of payment and economic activities keep on happening.
Installments are preferred for mortgage loans. Real Estate property ownership happens to be one of the top goals for not only Pakistanis but for people all around the world. Owning a plot or a home is a milestone for the middle class in our country. It is a very rare case that people pay full payment for the property they want to buy. Most people prefer installments due to the low affordability and high inflation. Installments are paid until full payment is done.
This method of payment is used very commonly and is a way of life for business transactions. To understand installment payments better, you need to look at the pros and cons of installment payments.
Pros of Installment payment plan:
- Suitable method if your payment is not available at once
Paying in installments is the best solution for you if you really want to buy a plot but do not have enough funding for it. Installments plan make it easier to pay small payments in different continuous time periods. Buyers can achieve their dream property with installments payment in the agreed period in proportion to their budget and capacities.
- Budget-friendly Method
Paying installments for plots make helps you budget better. This is one of the great things about paying for plots in installments. Paying for your plots in installment helps you divide up the amount into many small payments over time. This way, you do not have to worry about a big payment.
Installments for plots also make it easier to maintain the same level of living standards buyers were having before.
Other areas of life that need funding will not suffer in this way. Most people buy an automobile after being a plot owner. The payment for this automobile is only possible if less is spent on the plot or is planned on installments. Otherwise, it becomes very difficult for the buyers or investors to pay for both properties.
- Better Money management
One of the many benefits of paying the seller in installments is that you get to manage your finances better. Buyers can then easily purchase plots without needing more savings. Even if you have savings for any other item, you should not use that money here. This is because using the funds that you have saved for a long time for something else, it would be difficult to put those funds back for the original purpose.
Many people prefer installments, as they can invest the extra money in short-term savings. They can easily earn profit from there and they can manage their funds better.
Cons of Installment payment plan:
- A period of money instability
Many buyers do not have the required funds for each installment, buyers feel very anxious as they have the stress of paying after every month and have no relaxation. The buyer needs to have the proper amount of payment to fund the installments too.
- Interest Rate
In some cases, an interest is added to the real original price of the plot. Each installment is based upon principle and interest. This is considered the extra funds people need to pay for their plot.
- Missed opportunities
The seller may resort to choosing the installment system as he knows that people can’t afford the full payment. So the seller chooses the installment payment plan so that his plot gets sold. This happens mostly when there is any defect in terms of plot surroundings etc. So the Buyer needs to be careful.
- Missed Installment
If the buyer misses any installment due to any reason, a fine is applied due to the missed payment. This is an additional payment which the buyer has to bear due to the lateness in payment of the original installment. The sellers do not want that the buyer to stop the payment and ask for a refund of already paid installments. So they try to give them relaxation that the buyers can restore the installment and give them different options.
- Delay in development:
Sometimes, there is a delay in the project due to a lack of payment of installments by the buyers or by neglectfulness of the developers. This kind of situation needs to be avoided by both parties for a peaceful contract.
- Fee for late payments:
There are certain fees and penalties that come with installment payments, especially if the payment is not done on the due date of payment. There are many reasons for the late payments but Buyers are given no further relaxations. Buyers are then caught off-guard after receive your statement with a huge amount you have to pay.
The plan needs to be followed as per plan otherwise it will become difficult for the buyers. The budget of the buyer is disturbed to a great in this extent.
Emergency situations need savings individually. Buyers are already paying the installments every month. If they encounter any emergency, it would be quite difficult for them to pay for both. One Payment needs to be left out in this situation. We don’t know when we need to pay for an emergency and to have a reserve fund for such situations.
The idea is to make sure that buyers are able to balance the two and that you make the most out of this payment method. In the end, the installment payment should strengthen your finances and not add in debt.