Loans & installments – before you sign
A loan isn't good or bad in itself – it depends on what it's for and on what terms. A low monthly payment tells you only half the story.
- Don't focus on the monthly payment – look at the APR (annual percentage rate). It bundles every cost into one comparable number.
- Work out the total: payment × term plus fees, then compare it with the cash price. The gap is what the financing really costs.
- With 0% financing and buy now, pay later, watch for processing, shipping and late fees – and check whether paying cash earns a discount.
- Separate investment from consumption: for things that lose value, save up rather than finance. Expensive old debt can be refinanced – see paying off debt.
What matters
The most common mistake is being dazzled by a low monthly payment. €39 a month sounds harmless – but over 48 months that's €1,872 for a sofa that might have cost €1,400 in cash. What matters is the APR, because it folds interest and fees into one comparable figure; a consumer loan often runs 8–12% a year, an overdraft frequently 10–14%. Buy now, pay later feels especially harmless because each installment is tiny – yet three or four running purchases at once quickly slip out of view, and late fees turn a supposedly free delay into a costly one. People also overlook the difference between investment and consumption: a loan for training or a tool that earns you income can make sense; for a phone or a holiday you're paying interest on something that only loses value. And if you already carry expensive debt, refinancing it to a lower rate often saves more than some investments return.