I'm considering buying a service which will cost around £6000 (which I consider to be a significant amount). There is a financing option available which allows the amount to be paid off over 24 months, interest-free. It is structured as £250 pm for 24 months such that the entire balance will be paid off by the end.

Why would I pay as a lump sum instead of taking the loan? Assuming that repayments of the loan are paid back on time.

The loan conditions are stated as:

Rate of interest 0% per annum, total repayable £6,000. Total credit charge £0, representative 0% APR.

  • Are you inquiring what your motivations would be for paying in an upfront lump sum vs on a payment plan? Or do you want to know what the seller's motivations are for offering a payment plan without interest if someone could afford to pay it upfront in whole? – Shorlan Sep 5 at 21:30


There’s a cost to making recurring payments, even if it’s not financial. You need to either set up the recurring payment and ensure you have enough in the account at each payment, or remember to make the payments manually, which takes time and effort.

From the vendor’s end, if the conditions for missed or late payments is fair, perhaps the offer is made for marketing rather than financial motives. That is, they want you to feel good buying from them - or perhaps they just want to keep their company name in your head, and instead of giving you stationery with their name embossed, they condition you to pay them on a monthly basis.

  • 2
    Good answer; I would add Risk as well. Many of these deals charge heavy interest retroactively if you miss one payment. – D Stanley Sep 9 '18 at 21:43

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