How a S $ 3,000 Invoice Became S $ 30,000: The Truth Behind Retailer Installment Plans

SINGAPORE: Cash strapped, Linda took out an installment plan with a retailer for a laptop, washing machine, sofa and bed totaling around S $ 3,000 in 2010.

This turned out to be a mistake. She still pays for these items today, but the value of her debt has swelled to S $ 30,000 over the years.

“It really touched me. I think, for now, if I don’t have the money, I won’t buy the thing. I’m going to save, ”said the regretful Linda, who declined to use her real name.

She is one of a group of people who have bought hire purchase from electronics and home furnishings retailers in Singapore, drawn by the low monthly repayments.

But few people realize that the interest rate can reach 33.99% per annum, as the Talking Point show finds out. And it does not include the late payment fee. (Watch the episode here.)

While there are interest-free installment plans, consumers do need a credit card and must spend a minimum of S $ 500. Those who are not eligible might turn to retailer payment plans for their payments. expensive items – without making their sums.


A home furnishings store, for example, offers an installment plan with interest of 26.9 percent per year, plus late interest of 1 percent per day. A store employee said those who take these plans “don’t have any money.”

GYC Financial Advisory Vice President William Cai, who helped Talking Point calculate the final amount consumers would pay for certain items at a 26.9% interest rate, doesn’t think these installment plans have financial sense.

A TV that costs S $ 399 would ultimately cost S $ 720 based on S $ 20 refunds over 36 months. That’s 80 percent more than its original price.

A refrigerator that sells for S $ 899 would cost you S $ 2,108, if you paid S $ 35 a month for five years – a price increase of 134.5%.

“My favorite thing is looking for a really cheap brand or a really cheap second-hand product. Or if I can’t afford it, I would ask a friend of mine to… help me, ”Cai said. “It’s better than paying so much interest.”

But are retailers offering unfair interest rates?

“These types of loans are unsecured, like credit cards… Based on that as a benchmark, it’s fair,” said Mr. Cai, who noted that credit card interest rates vary. generally between 24 and 26%.

Consumer products also depreciate rapidly. “The value could reach almost zero in a short period of time, and retailers are at quite a high risk of getting involved in such a business. So I would say it’s fair enough, ”he added.

What he would like, however, is more clarity for consumers, with retailers calculating everything for them so they know the total amount of interest they would be paying.

In a Talking Point street poll, most people said they wouldn’t buy into these installment plans if they knew how much they could pay.

But one respondent explained, “An air conditioner is probably a necessity due to our hot weather… so paying, for example, $ 100 and up per month with a monthly salary of, say, $ 1,600, I think it should have been. meaning for (people with low incomes).


Singapore courts have said they offer zero percent installment agreements with major bank credit cards, but recognize that these options generally have a minimum income threshold, which not all consumers can meet.

“The intention of the courts is to serve those customers who need to purchase expensive items that meet the basic needs of family and life,” said the retailer, which offers them interest rates ranging from zero percent to 33.99 percent per year.

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