Buying on installment online shops leads to unclear debts
It is a hot topic just after the holidays and expensive December month: buying on installment via credit cards, at web shops or mailing house credits can lead to financial problems. Not in the least because online stores often charge usurious interest and aim at the financially weak anyway.
Minister of Finance Hoekstra is fed up and keeps a keen eye on home shopping businesses. Hoekstra says that the number of people with payment arrears and the number of consumers who buy on credit is unacceptably high. He therefore gives webshops one more year to put things in order and reduce the number of installment purchases.
Consumers who come into debt through payment in installments must be protected. Especially since it often concerns people who already have financial problems. Because of all these credits, they end up in the rain even more.
Unmanageable debts due to usurious interest rates
At large online shops such as Wehkamp, Otto and the Mediamarkt, customers can choose the payment option 'payment in installments'. That seems like a nice deal: the product is delivered straight to your home and payment is made in monthly installments. But what seems so beautiful is often a financial block to the leg. Such an installment can take years, which of course costs extra money. Especially since the interest rates often run up 14%, the legal maximum permitted percentage.
This is quite lucrative for online stores. This is evident from the 2019 annual report of Wehkamp, for example: the credits and insurance alone generate about 8% of its annual turnover.
But what does it cost the customer? A calculation: if you buy a new washing machine or TV at the Mediamarkt via the 'payment in installments' option, you pay 13.5% interest, according to the website. With a price of 1000 us dollar and payment in 4.5 years, the total amount will be 1319 us dollar, one third more expensive than the original price! Those who have (several of) these types of loans are not only much more expensive, but can also lose the overview in the jungle of monthly payments and debts that seem to be endless.
Purchase on installment: goosebumps for web shops
It is extra cruel in this context that buying on installment is the only way for some people to make another purchase. For example for people who are already in debt due to other loans, and then the washing machine also gives up. They are forced to accept that the price of a new washing machine by payment in installments rises to over 30% more.
The cabinet wants web shops to stop offering these very expensive payment options (installment purchase / installment payments / payment in installments). But for the shops themselves, paying in installments will of course continue to be the goose that they don't want to slaughter.
The best tip we can give consumers is therefore: never buy products on credit. You end up paying a lot more and you will be stuck with a debt for years to come. Those who have several of these types of loans often lose the overview, with all the consequences that entails.
Responsible: transferring loans to a personal loan
What is a sensible way to make a (necessary) expensive expense or to create an overview within your existing loans and credits?
The best option is to transfer existing, expensive loans . Many people do not think about this or do not know the option of refinancing loans at all. But it is often the cheapest and most relaxing way to get an overview of all your debts at once.
How transfer works? You determine the total amount of your existing credits (web shops, overdrafts, credit card debts, mail order credits, etc.). You then take out a Personal Loan for this amount and use it to settle all outstanding debts in one go.
Merging and transferring loans to one Personal Loan has the following advantages:
- The interest on a Personal Loan is always lower than that of your other debts. The interest rate is currently even historically low: as low as 3.9%.
- You borrow the total amount in one go, so you are rid of all other expensive, unclear loans in one go.
- The interest remains fixed for the term of your Personal Loan. So you always know exactly where you stand and you will not be faced with unpleasant surprises.
- Overview and peace of mind: pay off a fixed amount per month for just one loan.
- You can always repay in the meantime and there is no penalty. In fact, we always recommend accelerated repayments, because the sooner you are debt-free again, the better.
Would you like to know whether it is also possible for you to transfer your current, expensive loans to one Personal Loan with a lower interest rate and a good overview?
Here you can request a quote without obligation and you will immediately receive clarity about the possibilities.
The sooner you can go through life debt-free again, the better.