Since it’s a loan, we charge interest, usually at a monthly rate. (You might have also heard this referred to as hire purchase or later pay service.)
“With product financing, you can get the product now and pay it off later in bits.”
What’s the difference between product financing and mobile credit?
Product financing helps you borrow the amount you need for the product you’re buying. You then pay the loan directly to the retail store you have shopped with. Since you don’t get cash, you won’t have the temptation of spending the loan amount on something else. This saves you transaction or withdrawal costs to pay the retailer.
With mobile credit, you get cash/M-PESA directly from the lender to spend however you like. You might feel like you have to borrow more than you need to make the most of your credit limit, meaning that you will end up paying more interest at the end.
Here’s where it sometimes gets confusing…for some services, like Aspira, you can apply for product financing through a mobile app with a similar process to mobile credit. We try to make it as simple as possible to get what you need by providing you with a mobile app to apply and monitor your loans. However, we do not give out cash/M-PESA.
What about product financing versus lay-by?
Both product financing and lay-by let you choose a product, put down a deposit (usually 20% minimum) and select a plan to pay off the product over several months.
However, with lay-by, you will only receive the product when you have fully paid off the full product price (plus any other charges). If you decide partway that you no longer want to purchase the product, you will have to ask for a refund. Product financing facilitates you to get the phone, TV, fridge or other product that you need as soon as you have been approved without paying any deposit – instead of waiting up to a year. For this extra convenience, we charge an interest rate of 4%.
What about product financing versus hire purchase?
Product financing and hire purchase operates the same way; however, you should check where the company will allow you to purchase from – is it from their inventory or other retailers?
So how should you make your next purchase?
As with any financial product, you should look at your current situation and decide what’s best for you. It would be best if you considered your income, your average expenses (here’s how to figure them out), what you need and how soon you need it. You should also evaluate whether you can afford the service by asking what kind of fees and interest will apply, how flexible it is and what happens if you don’t pay in time.