The monthly payment ruse

A critical look at "low cost monthly repayments"

8th November 2021

Television advertising of many products will often stress the amount of money we can borrow i.e. "you can borrow £25,000", but when it comes to paying the money back they state, "for only £225 a month".

Car salesmen, when working out a deal will ask, "how much are you looking to spend a month?"

A three piece suite may cost £500, but the headline display figure in large letters will be "for only £10 a month".

This trick is also used with the idea of "tailored loans" - where your finance deal is tailored to your budget. What the lender will do is find out how much you're prepared to pay each month and then increase the length of borrowing in order to reduce the monthly repayment to the amount you can pay.

Why is it done this way?

It is a subtle and clever psychological ploy that is designed to make us consider whether we can afford the monthly repayment rather than looking the total cost of the purchase.

Most people these days get paid monthly, therefore we have a tendency to budget on a monthly basis. Sellers know this and by tricking us into thinking in terms of monthly repayments, rather than the cost, they can convince us that we can afford their products even when they are a very poor deal.

Costly borrowing can be disguised by the trick of falsely associating low cost with low monthly repayments. The real cost of borrowing is the interest that is charged on the borrowing. In order to reduce monthly payments, creditors need to increase the length of the loan and this significantly increases the interest on the borrowing.

Defending yourself

It's simply being aware that this sales technique is often used and it can lead you to accepting a very poor deal. Just make sure that you consider of the amount of interest you're actually paying as this can be quite significant with longer loans.


The monthly payment ruse is used frequently in creditors' advertising and selling techniques. It's not illegal, but it is a way of manipulating customers as to how they think about borrowing. The idea is to get people to think in terms of monthly repayments and make financial decisions on this one aspect of borrowing alone.

The monthly payment ruse appeals to our desires; it focuses our attention on what we want to see and distracts us from what we don't want (or the lender doesn't want us) to see.