Instalment Plan vs Loan Calculator

Currency

Price on the instalment plan

Cash or discounted price

Term, months

Loan rate, % a year

Down payment

Result

Instalment payment

$10,000.00

Loan payment

$9,928.76

Instalment plan in total

$120,000.00

Loan in total

$119,145.09

Difference

$854.91

Which is cheaper

the loan on the discounted price costs less

This result is informational only and is not professional advice.

A free instalment plan is paid for in the price

Compares a zero-percent instalment plan against a loan taken on the discounted price, and shows which one really costs less.

Nobody lends money for nothing. When a shop offers twelve months at zero percent, the interest is already inside the sticker price — which is why the same item is cheaper if you pay cash or ask for the discount.

The honest comparison is therefore not 'zero percent against twenty-four percent'. It is the instalment price against the discounted price plus the interest on it, and the gap is often smaller than either side claims.

What this calculator shows

The monthly payment on each option
The total paid on each option
The difference between them, and which is cheaper

What to keep in mind

The instalment plan really is free of charges. Insurance or a service fee attached to it belongs in the instalment price.
The loan is a standard annuity: equal payments, interest charged on the outstanding balance.

FAQs

Where is the catch in a zero-percent instalment plan?

In the price. The shop pays the bank a fee for financing you, and that fee is added to the tag. Ask what the price is for immediate payment and the difference appears.

Is an instalment plan a loan?

Legally it usually is: a loan agreement with a subsidised rate. It appears in your credit history and a missed payment carries the same consequences.

When is the instalment plan genuinely better?

When there is no discount for paying immediately, or when the loan rate is high. If both prices are the same, an interest-free plan is free money.

Does the down payment change the answer?

It shrinks both sides but not equally: it removes interest only from the loan. The larger the down payment, the better the loan looks.

Worked example

A phone at two prices

Input: 120,000 over 12 months, or 105,000 with a loan at 24 percent

Output: the loan wins by about 855

Note: The instalment plan costs 10,000 a month, the loan 9,929. Nearly the whole 15,000 discount is eaten by interest, which is how the shop makes the free plan pay for itself.

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Instalment Plan vs Loan Calculator

Result

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