INSTALMENTS-TIPS

*CLICK HERE FOR INDEX-TOPIC SEARCH

IMPORTANT TIPS

• INSTALMENT PURCHASE SCHEME is a contract between the buyer and the seller by which buyer makes part payment of the price of the commodity (called DOWN PAYMENT) at the time of purchase to the seller and agrees to pay remaining amount in fixed instalments and, in return, the seller gives that commodity to the buyer.



• CASH PRICE : The amount in full (Selling Price) to be paid at the time of purchase is called CASH PRICE of the commodity.



• DOWN PAYMENT : If the buyer does not pay the full price (selling price) of the commodity and prefers to buy it under instalment scheme, then the part payment made by him at the time of purchase is called DOWN PAYMENT.
  
  For example: Cash price of a TV is Rs. 15000/- and the buyer pays Rs. 5000/- at the time of purchase, then Rs. 5000/- is called DOWN PAYMENT.



• RATE OF INTEREST : If a commodity is purchased under instalment scheme, the buyer has to pay some extra amount as interest on the unpaid amount which is calculated at some rate called RATE OF INTEREST.



• INSTALMENT : An amount paid regularly after definite time period (till the total dues,i.e.principal + interest, are paid in full) by the buyer to the seller is called INSTALMENT.



• For calculating simple interest we use the following formula:
  
  I = PRN/100
  
  where I = simple interest, P = principal amount, R = rate of interest( % ) and N = number of years (time period in years).



• For calculating the rate of interest we use:
  
  R = (I x 100)/PN.