Purchasing furniture with a plan that requires 12 equal payments over a year is an example of what?

Purchasing furniture with a plan that consists of 12 equal payments over a year exemplifies an installment plan. An installment plan allows consumers to buy a product and pay for it over a specified period through periodic payments, which in this case are divided into 12 equal payments. This option provides the buyer with the advantage of immediate use of the furniture without the need to pay the total upfront, making it more manageable within their budget.

In the context of installment plans, once the final payment is made, the consumer usually owns the item outright. This payment structure can create a clear understanding of the total cost and allows for better financial planning.

Other options, such as a layaway plan, typically involve reserving an item by making periodic payments but do not allow the consumer to have the product until it’s fully paid off. Social credit often refers to community-based lending or credit systems rather than a structured payment plan for goods. A leasing agreement usually pertains to the right to use an item for a specified period without ownership, which differs from the ownership nature of an installment plan.