Interest-free installments: are they really free? How to compare them with paying cash

"12 interest-free installments" is only free if the installment price equals the cash price. If you get a discount for paying cash, that difference is the hidden interest.

Example: a TV costs ₲6,000,000 in 12 payments of ₲500,000, or ₲5,400,000 in cash (10% discount). Paying in installments costs you ₲600,000 more: an implied rate of 21.8% a year. In this guide you learn how to calculate it and decide.

The question that changes everything: how much is it in cash?

Before accepting installments, ask four questions:

1. What's the cash price? (cash, debit or transfer).
2. What's the final price in installments? Add up all the payments.
3. Is the first payment due today or in a month?
4. Are there administrative fees, insurance or commissions included?

If the first two figures are the same, there's no hidden cost. If they aren't, do the math.

The math: what financing costs

The cost formula is simple:

Cost of the installments = (payment × number of payments) − cash price

To turn it into a rate, treat the cash price as the amount they lend you and the installments as what you pay back. It's the same calculation we do for a loan.

This table shows the implied rate for a ₲6,000,000 product in 12 payments of ₲500,000, depending on the discount you get for paying cash:

The second-to-last column assumes you pay the first payment a month after buying. The last one assumes you pay it the same day: in that case you finance less money and the implied rate goes up.

Notice the pattern: a discount of just 5% already equals a 10% annual rate, similar to what a CDA pays. With a 10% discount, the implied rate is above 21%.

A 10-second approximation

If you don't have a calculator handy, this rule gives a fairly close idea:

Approximate annual rate ≈ 24 × (cost of financing ÷ cash price) ÷ (number of payments + 1)

With the TV: cost ₲600,000, cash ₲5,400,000, 12 payments. First 600,000 ÷ 5,400,000 = 0.111. Then 24 × 0.111 ÷ 13 = 0.205, that is, 20.5%. The exact calculation gives 21.8%: the approximation falls a bit short, but it's enough to decide at the store counter.

Should you pay cash? A three-step rule

1. Calculate the implied rate of the installments, with the table above or with the calculator.
2. Compare it with what your money earns or what a debt costs you. Some October 2026 references: September inflation was 1.7% year over year; a CDA of over a year paid on average 9.95% at banks (June 2026, according to the BCP); and the maximum interest on a credit card in guaraníes is 19.62%.
3. Decide:

The rule has one condition: paying cash can't leave you without an emergency fund. If to pay cash you'd have to use that money, it's better to keep the money and pay in installments.

Full example: a ₲4,000,000 phone

A store offers a phone in 6 payments of ₲666,667 (₲4,000,000 in total) or ₲3,800,000 in cash (5% discount).

• Financing costs ₲200,000.
• The implied rate is 1.49% a month, about 19.4% a year.
• If you have the ₲3,800,000 available and it isn't from your emergency fund, you pay ₲200,000 less for the same phone.
• If that money is your emergency fund, buy in installments or wait: ₲200,000 is the price of having liquidity for 6 months.

When "interest-free" really is free

There are promotions where the price is the same in cash and in installments. There, financing really is free: you keep your money for several months and pay nothing extra. Check that:

• The payments don't include administrative fees or insurance that raise the total.
• Your card doesn't charge costs for the transaction (annual fee, commissions).
• You can pay all the installments without falling behind: if you're late, late-payment interest appears.

Five common mistakes

1. Comparing only the payment. "₲500,000 a month" sounds small, but the total is what matters.
2. Forgetting when the first payment is due. Paying it today raises the implied rate.
3. Buying because the payments are low. With many small installments you end up with a total of monthly payments that chokes your budget. A common reference is that the total of your installments shouldn't exceed 30% of your income.
4. Using your emergency fund to pay cash. You save a discount but you're left without a cushion.
5. Not asking for the cash price. If you don't ask, you don't know.

Compare your installments now

Enter the cash price, the number of payments and the amount of each payment. The calculator tells you the implied rate and compares it with what your savings earn.