Everything you need to know about payment instalment plans


Payment plans are gaining massive popularity in Australia. They allow individuals to pay the outstanding amount of their purchase over a set period rather than upfront. This not only increases cash flow but helps people to manage their finances better. 

Let’s get to the following commonly asked questions: 

  • What are payment instalments?
  • Different types of payment instalments
  • Benefits of payment installments
  • Factors to consider when choosing payment instalments
  • How to set up payment instalments

Q1. What are payment instalments?

Payment instalments, also known as buy now pay later (BNPL), allow individuals to spread the cost of their eligible purchases into individual instalments. In Australia, instalment payment plans are available at thousands of online and in-person retailers.

You can choose to pay your instalment plan in weekly, fortnightly, or monthly instalments to spread the cost more manageably.

Note: While some BNPL services charge interest, many offer interest-free instalments and will only charge late fees if the minimum monthly payment isn’t met.

Q2. Different types of payment instalments

If you’re interested in setting up a payment arrangement, there are plenty of options available to you, including traditional instalment plans, BNPLs, and credit card instalments. 

  • Traditional instalment plans: Typically used when purchasing large items like furniture or electronics, the traditional payment plan divides the total cost of the purchase into equal instalments over an agreed period of time. Each instalment includes both the principal amount and any interest. 
  • BNPL: These payment options allow you to split purchases in an interest-free period, as long as you make payments on time. With BNPL services like Klarna, Afterpay, and Zip, you must make an account and link it to your payment methods.
  • Credit card instalments: If you have credit card accounts, you may be able to take advantage of monthly instalment payments with your provider. Rather than making high-interest credit card payments, you can choose to convert large purchases into monthly instalments at a fixed rate. Late fees may apply, so it’s essential to check the terms and conditions.

Q3. Benefits of payment instalments

There’s a reason why 360 million people have an instalment plan balance. If you’re deciding whether to pay in instalments, you’ll see the following benefits: 

  • Affordable and flexible payments, increase your cash flow and allow you to budget better and save.
  • No or low-interest rate monthly payments, saving you money.
  • Increased buying power
  • Building and improving credit score

Q4. Factors to consider when choosing payment instalments

With payment instalments, the customer pays over an agreed period of time. Rather than facing a high credit card statement at the end of the month, many are choosing to take out an instalment plan. 

Before getting started, it’s essential to go through your options. The factors to consider when choosing a payment instalment plan include: 

  • Check if your offered instalments charge any interest or fees. Compare different options to find the most cost-effective one, paying attention to term deposits and your monthly instalment amount.
  • Look at the duration and frequency of instalments and determine if the repayment schedule and due dates fit your budget and financial situation.
  • Calculate the overall cost of the purchase, including any fees and charges. Compare it to other payment methods to ensure you get a good deal.
  • Assess your income and ability to make timely payments. Make sure you can afford the instalments without straining your finances.
  • Find out if the payment instalments show up on your credit report. Timely payments can help build your credit, while missed payments can negatively impact you. To avoid missed payments, set up a direct debit when you set up your plan.

Q5. How to set up payment instalments

Are you ready to apply to pay in interest-free instalments? Here’s how to improve your existing payment methods and set up an instalment plan.

  1. Select a payment instalment option by researching the different payment instalment providers or options available to you. Consider interest rates, fees, and repayment terms before filling out an instalment form.
  1. Decide on the item or service you want to purchase using the payment instalment plan. Research which standard purchases meet the eligibility criteria.
  1. Create an account with the payment instalment provider. This may involve providing personal information and agreeing to their terms. Check what eligibility criteria apply and whether your instalment plan is subject to change.
  1. Provide the necessary payment details, including your credit or debit card bank account details. This will be used for processing your instalment payments due at the end of the month.
  1. Specify the repayment frequency, whether weekly, fortnightly, or monthly, and the instalment plan duration. Ensure that the repayment schedule aligns with your budget and that plan balances will not affect your financial situation negatively.
  1. Review your choices and confirm your agreement to proceed with the payment instalment plan. Double-check the accuracy of your payment details and the terms you have selected, as well as your current purchase balances.

Summing up

Payment instalment plans offer an alternative and flexible way to repay purchases. With many BNPL services to choose from, you can choose a plan that fits your individual financial needs and circumstances. 

If you liked this article, check out the WeMoney blog, where we regularly post financial advice. Alternatively, read our latest article, ‘What is buy now pay later (BNPL)?

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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.

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