# Buy now, pay later and payday loans > When buy now, pay later is really free, when zero percent hides a price, and why payday loans, short microloans, are the most expensive money there is. - Course: [Personal Finance: Budget, Safety Cushion, Debt and Investing](https://productovi.com/courses/personal-finance.md) - Module: What does this debt really cost? - Lesson 11/32, ~17 min - Source: https://productovi.com/courses/personal-finance/installments-and-microloans ## Buy now, pay later: zero percent, two ways **Alex Tutor:** You're still helping Sam's family untangle their debts. Next are two purchases made in installments, or pay in parts, which English-language shops call buy now, pay later. **Sam:** Both our installments said 0%: the washing machine, six payments of 1,250, and the laptop, ten payments of 1,900. So at least those cost nothing, right? **Alex Tutor:** Compare each with the price for paying at once. The washing machine cost 7,500 either way: 6 × 1,250 = 7,500. Usually the shop pays the bank a fee for those months, so for you it really is free. **Sam:** The laptop had a discount for paying at once, I remember. 16,500 instead of the installment price. **Sofia:** Ten payments of 1,900 is 19,000. So the "zero percent" cost something after all. > **Exercise:** The laptop cost 16,500 UAH if paid at once, or 10 monthly payments of 1,900 at "0%". What is the **hidden cost** of paying in parts? ## A price raised is a rate hidden **Alex Tutor:** Think of it as a loan: you got a 16,500 laptop and repay 19,000 in ten months. Solve for the rate, as in the first lesson, and the real annual cost comes out at about 36.9%. **Sam:** Not far from the loan we were offered to pay off the card. And it said zero. **Alex Tutor:** The interest line said zero. The price did the work. So the first question for any "pay in parts" offer: what would it cost if paid today? **Sofia:** And if the answer is the same price, it is a free loan from the shop. **Alex Tutor:** As long as every payment is on time. A missed one can mean fees and a worse credit record, so set them to go out on payday. > **Exercise:** **True or false:** if an installment plan says "0%", the purchase always costs the same as paying at once. ## Instant installments with a fee **Sam:** Now my wife's phone broke. Her banking app offers "instant installments" for any purchase: 10 months, a fee of 1.9% a month. **Alex Tutor:** On what amount? In offers like this the fee is usually on the full price, every month. Take a 12,000 phone: 1,200 of price plus 228 of fee, 1,428 a month. **Sofia:** 14,280 in total. And the fee is charged on 12,000 even in the last month, when 1,200 is left. **Alex Tutor:** Same trick as the "0%" loan. The real annual cost is about 47.5%, more than Sam's credit card. A small fee per month, a big rate per year. > **Exercise:** A 12,000 UAH phone is bought with an "instant installment": 10 months, a fee of 1.9% of 12,000 every month. What is the **total cost** of the installment, everything paid minus 12,000? ## Payday loans: the price per day **Sam:** Last month, six days before payday, an ad offered me 4,000 "in five minutes". I nearly took it. **Alex Tutor:** Microloans, which English speakers call payday loans, are priced per day. As of 2026, Ukrainian law caps the daily rate on consumer loans at 1% of the amount, with all costs included. Even that cap is 1% × 365 days: up to 365% a year. **Sofia:** Six days at 1% of 4,000 is 240. For a week of groceries. **Alex Tutor:** And it rarely stays at six days. If payday doesn't cover it, the loan is extended by a new agreement, and a month costs 1,200. A purchase on a credit card within its grace period would have cost nothing. > **Exercise:** A microloan of 4,000 UAH costs the legal maximum of **1% a day**, all costs included. What does it cost if it is repaid after **30 days**? ## Red flags **Alex Tutor:** Three questions work for any of these offers. What would it cost today? What is paid in total, every fee included? And what is the real annual rate the lender must show? **Sofia:** And a rate quoted per day or per month is a hint to ask for the yearly one. **Sam:** And "your first loan is free"? **Alex Tutor:** Free if repaid on the exact day. The business is the second loan and the extensions. As with every loan: check the current terms and your own situation; this is education, not personal advice. > **Exercise:** Which are **red flags** in a "pay in parts" or microloan offer? Select all that apply. ## Your turn: the vacuum cleaner **Sam:** My wife wants a 9,000 vacuum cleaner in parts. Before she says yes, what should she check? **Alex Tutor:** Write it for her: the questions to ask the shop and how to turn the answers into one number she can compare. **Sofia:** And what makes it a yes or a no. **Alex Tutor:** Right. A rule she can use for the next purchase too. > **Exercise:** Sam's wife wants a 9,000 UAH vacuum cleaner in parts. In 3–4 sentences, write what she should ask the shop, how to turn the answers into one number, and when the answer is yes. > **Key ideas** > > - "Pay in parts" (buy now, pay later) is free only when the total equals the price for paying today. The washing machine: 6 × 1,250 = 7,500, same price. The laptop: 10 × 1,900 = 19,000 against 16,500 at once, a hidden **2,500** (15.15%), about **36.9%** a year. > - A monthly fee on the full price keeps charging for money already repaid: a 12,000 phone at 1.9% a month for 10 months costs **2,280**, about **47.5%** a year, more than a credit card. > - Microloans (payday loans) are priced per day. As of 2026 the legal cap is 1% a day, all costs included, still up to 365% a year: 4,000 for 30 days costs **1,200**. > - Ask three questions: the price today, the total paid with every fee, and the real annual rate. Check current terms and your own situation: this is education, not personal advice. **Alex Tutor:** Next: the module's case. Sam's three debts, one budget, and two ways out. - Previous lesson: [Credit cards: grace period and the minimum-payment trap](https://productovi.com/courses/personal-finance/credit-cards.md) - Next lesson: [Case: Sam's way out of debt](https://productovi.com/courses/personal-finance/way-out-of-debt-case.md) --- Productovi Learning. Free, no sign-up needed to read.