Installment selling refers to a system where a customer is allowed to take a good by paying small amounts until when the whole amounts are cleared. This system is very common to items which are durable and expensive that consumers may not be able to pay cash at once e.g. Television sets cars e.t.c.

Characteristics of Installment Selling:

  1. Payments: The purchase price is divided into equal installments, typically payable monthly, quarterly, or annually.
  2. Duration: The installment period can vary depending on the agreement, ranging from a few months to several years.
  3. Ownership: The buyer does not obtain full ownership of the item until all installments are paid.
  4. Interest: Interest or finance charges may be applied to the installment payments, depending on the terms of the agreement.
  5. Legal Agreement: Installment selling typically involves a legally binding contract between the buyer and the seller.

Advantages of Installment Selling:

  1. Affordability: Installment payments make expensive items more affordable by spreading the cost over time.
  2. Immediate Use: Buyers can enjoy the use or benefits of the item while making regular payments.
  3. Convenience: Installment selling provides a structured payment plan, making budgeting and financial planning easier for buyers.
  4. Access to Credit: It allows individuals or businesses to make purchases even if they do not have the full purchase amount upfront.
  5. Flexibility: Installment plans can be tailored to suit the buyer’s financial situation, with options for different payment frequencies and durations.

It’s important to note that installment selling may involve additional terms and conditions specific to the agreement between the buyer and the seller. Buyers should carefully review the terms, including the interest rate, repayment schedule, and any potential penalties or fees for late payments or early settlement.


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