When you buy big items like furniture, you would normally have a few options on how to pay for them. Usually, the store will give you any of these 3 options:
- Pay cash (usually this can come with a discount)
- Pay in 3 months (Usually this option does not come with interest)
- Lay-by for 12 months
- Pay in 36 months (usually you pay interest of 21%)
Pay in cash:
If you have money saved up, this is the best option because you can sometimes get a discount on the original price. But only a few people can afford this option as most people do not have that much money saved. Some people might want to take advantage of this by using their credit cards or take a personal loan. This would be a big mistake, the discount is not worth going to credit for as credit cards and personal loans charge up to 21% of interest, and you will find the discount is only 10% of the purchase price.
Pay in 3 Months:
This is the second-best option as it allows you to get your item now, and then you pay for it over 3 months, interest free. Although it might be a good option, the payments might still be too much for most people to afford.
Eg.: if you buy an item that costs R15 000, you will have to pay R5 000 for 3 months. Be sure you can afford this otherwise they may start charging you interest.
Lay-By for 12 Months:
This option will save you on interest as you will be committing to pay for the item for 12 months, before you receive it. This will allow you to divide your payments into smaller amounts which you will then pay over the 12-month period. Nowadays, most people want things immediately, and no longer find this option attractive. If you cannot afford an item in cash, this option is best recommended because you are not paying anything extra and you can pay in smaller, more manageable amounts.
Pay in 36 months:
This is the most expensive way of buying an item and unfortunately because the monthly payments are affordable, most people end up going for this. But over the period of 3 years, you will find that for an item that costs R15 000 – you ended up paying approximately R21 000 for it. That is R6 000 more than you were supposed to pay. This option is to be avoided at all costs even though the monthly payments may lookaffordable.
Buying a new item can be exciting but be sure that you choose a payment option that is money smart and within your budget.
