JEDDAH, 30 August 2005 — It’s sometimes called the easy time payment plan, and it allows you to get something now for a promise to pay monthly installments later. But it’s also a financial agreement, and though some unscrupulous people use it to create an illusion of quick cash, some scrupulous people who overuse it may be heading toward a quick crash.
Many people consider installments to be a relief. Some well-to-do people actually make installment purchases and then sell the goods to get investment cash. Middle-income people are the ones who often use installments to limit their debt, to get married, or to buy their dream house.
Although businesspeople contend that installments are a very comfortable and convenient method of payment, many debtors don’t realize that the installment payment can go on long after the item purchased has lost its luster. Basically it boils down to two types of people who use installment plans — those who pay on time and those who have no intention of paying, period. Arab News examined the installment payment issue and discovered some people with very novel ideas about the use of such plans.
M.S. had to buy 10 cars on monthly installment and sell them to finance his small project. “At first, many family members objected to me financing my project this way,” he said. “Although I had the cash to finance this project without resorting to this, I thought this was the best way because I will invest the cash I have in something else.”
He will pay his installments for many years as he hopes his investments pan out.
Although easy time payments can allow some people to direct their cash to other investment channels, some people aren’t thinking that far ahead. Naser, a 26-year-old Saudi who works in the private sector, said it’s a way for him to get fast cash and pay for it later — through easy installments. He said that it is better than getting money from his friends because he can’t repay them as easily.
Muhammad says time payments are the solution to his financial problems. In the middle of every month, he goes to electrical equipment stores and buys an air conditioner on installment for SR1,600; then he sells it back to the store for SR1,000 in cash.
“It is a loss of SR600 for me, but it is the only way of getting a fast cash to pay back on easy installments,” he said. “I have to sell it to the store because it is easy because I will not get the same price outside the store.”
It does not take an advanced degree in mathematics to gather the consequences of such purchasing habits, but for young families starting out, time payments can become a sword dangling over their heads.
Khaleel, a government employee, said he began dreaming of marriage when he got his job. Under family pressure, he got a loan to pay a dowry and finish his apartment. Now he’s dreaming of getting out of debt. “Because I am paying for the loan, I have no money left to pay for the apartment rent,” he said. “The owner of the apartment has threatened to throw me out several times if I don’t pay, so I had to use installments to get out of this difficult situation.” A situation that has driven Khaleel to take drastic measures.
“With all the payments taken out of my salary, the only thing left is SR1,500,” he said. “I’ve had to become a taxi driver at night just to be able to pay all my debts.”
You can be certain his passengers don’t get the option of the easy time payment plan.
