Understand Installment Credit and How to Use it

by Starry

Mar 30 2021

Even though it may seem a simple enough concept on the surface, still there is quite an apprehension among people when it comes to buying on credit. The simple reason being that many don’t understand fully what is an installment credit and how it works. Below is a brief breakdown of installment credit. Learn how you can use installment credit to build a positive credit score. Also, find out how you can buy what you need right now by buying on credit and paying the amount in monthly payments.

What is an installment credit?

Installment credit, essentially, is a loan or an amount that you borrow. This is a fixed amount of money that you have borrowed as a loan from the borrower. You usually receive a loan when you provide your consent to paying the amount in monthly payments. These payments are of a fixed amount and are made up to a pre-decided duration, known as the repayment period.

For example, if you have agreed to pay back the loan in six monthly installments then it means that your repayment period is 6 months. The repayment period is usually laid out by the lender in the terms and conditions, however, the period can get stretched from months to years, depending upon how long it takes for the borrower to pay the loan amount back.

What can you use installment credit for?

Installment credit is also known more commonly as an installment plan or hire-purchase plan. You can get credit on the condition that you would be paying the amount in monthly payments, known as equal monthly installments or EMIs. Through these installments, you would be repaying the entire credit amount in a certain specified period. You may also be required to pay a fraction of the amount beforehand, known as the down payment.

You can use installment credit or installment plan to purchase the goods and services you require. Be it big-ticket items like automobiles or home appliances, or small expenses such as paying your recharge bill, you can use installment credit to pay for such expenses.

Using installment credit, you can immediately get possession of the product, even though instead of paying in full immediately, you would be paying the amount in monthly payments over an extended period. There are several plans currently in the market from where you can acquire credit installments. Several e-commerce platforms and online retailers also offer installment credit, allowing customers to buy their products on credit.

Why is Buying on Credit a thing?

Installment credit enables customers to buy something they need right now, without having to first save for months and months. Especially for something urgent, like a laptop you need to work or study, cannot wait until your bank has enough balance to buy one. Hence, it is pretty clear why there is an inherent appeal in buying on credit.

With several e-commerce sites and online retailers offering lucrative terms and conditions for availing installment credit, it makes sense why buying on credit has become quite a fad among online customers.

Characteristics that tell you what is an Installment credit

Installment credit can be summed up in the following points:

  • Installment credit functions essentially as personal loans or commercial borrowings. Hence, the customer should be paying the amount in monthly payments. These payments should be scheduled payments or installments.
  • With every payment, the customer ends up paying a certain percentage of the total amount of the installment credit initially borrowed.
  • Usually, with installment credit, a certain percentage of interest is also payable. However, with the recent emergence of several “Buy Now Pay Later” services and models, many e-commerce platforms and retailers now offer installment credit on zero interest rates. This means that customers are no longer required to pay additional interests or charges, outside the principal amount initially borrowed.

Advantages of buying on credit

There are several advantages of buying on credit. Below are some of the notable benefits of using installment credit:

  • Installment credit plans usually tend to have quite flexible terms and conditions.
  • The interest rates are as low as zero percent. This is a major advantage of buying on credit.
  • Installment credit allows customers to finance big purchases. This makes installment credit highly lucrative for customers.
  • Usually, with installment credit, where you would be paying the amount in monthly payments, the payment amounts remain the same throughout the repayment duration.
  • You can build or improve upon your credit score by paying the amount in monthly payments, in a timely manner. Given how your payment history primarily determines your credit score, this can be a great opportunity to not only upgrade your laptop but also to create a credit score that would tell lenders that you are a responsible borrower.

Things to remember about installment credit

  • Even though modern installment credit plans have flexible terms and conditions, you must carefully read and go through all the terms and conditions before taking installment credit.
  • Taking installment credit won’t directly impact your credit rating. You can even improve your credit rating by paying the amount in monthly payments on time. However, if for some reason or the other you fall back on your payments or miss any installments, then retailers often retain the right to do a hard check, in which case, your credit score might get impacted negatively.
  • Even though the interest rates on most installment credit plans are zero, they get progressively high in the case you miss your payments or there is a delay on your part to pay the installments. Hence, you should be mindful of that and only take installment credit if you are confident in your ability to pay the installments on time.


Hopefully, you learned and understood what is an installment credit. If used wisely, installment credit can vastly expand your purchasing power. More and more people are realizing this and opting for the “Buy Now Pay Later” payment alternative. You too can use installment credit tactfully to not only buy what you need but simultaneously build a responsible credit history.

Main keywords of the article:

First Order up to $10 off
We are compliant with BNPL Standards.
Copyright 2023 Atome. All rights reserved.
Company Name

Apaylater Financials Pte. Ltd.

Registration Number


Licence Number


Business Hours

Monday to Friday: 09:30 - 18:30
Saturday, Sunday or Public Holiday: Closed