Concept of Installment System
An installment system is just like a credit purchase and hires a purchase system of selling and buying goods. It is a credit system of purchase and sale of goods in which payments or receipts are made on an installment basis over a period of time. Like, hire purchase, in installment system an agreement is made between buyer and seller to purchase and sale of goods. In this system, a certain amount is paid as a down payment amount at the time of signing the agreement. The buyer makes certain down payment at the time of signing an agreement and the balance is paying in installment over a period of time. The remaining amount can be paid in different periodical installments such as monthly, monthly, half-yearly or annually over a period of time.
An installment plan is a way of buying goods gradually. An installment system is a credit sale in which payments are made in installments over a period of time. It is a distribution of plan assets to beneficiaries based upon a regular schedule. In this system, the buyer gets the possession as well as ownership of the goods right at the time of signing the agreement. You make regular payments to the seller until, after some time, you have paid the full price and the goods belong to you. During the course of paying the installment, if the buyer makes default in paying the installment, the vendor cannot responses the goods. In that case, the vendor can sue the buyer for the recovery of dues. Like in hire purchase even the paid installments also can not be forfeited in case of default in paying installment.
Installment payments can have tax advantages for the seller. Thus, it can be said that the installment system is a kind of credit sale where installments are entertained over the period and default in such payment cannot responses the goods and in that case, the vendor can only sue the buyer for the recovery of the amount due. Most importantly, they make expensive goods and services available to buyers who would not otherwise be able to afford them.