What was the installment plan of the 1920s?


Quick Answer

The installment plan of the 1920s, an arrangement that allowed people to buy what they wanted with a small down payment and pay off the rest in monthly installments, provided Americans a way to own what they did not have the money to buy. This system first became popular in this decade of overindulgence just prior to the Great Depression.

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Full Answer

Manufacturing of goods was on the upswing in these years. All kinds of new machinery and appliances sparked the interest of the consumer, from cars to radios and from washing machines to dishwashers, and many Americans wanted them all. Most, however, were unable to afford everything they wanted, so the installment plan became a popular solution. All the buyer had to do was put down some money and pay monthly payments until the financial obligation was met.

The plan seemed to be a win-win situation for all. Manufacturers kept producing, stores kept selling and people got to live better than they ever imagined. No longer did the majority of people pay cash for all they bought. Credit became popular, and consumer debt rose more than 100 percent during the decade of the 1920s. By the end of the decade, more than 50 percent of cars were purchased on credit. When the stock market crashed in 1929, many consumers were drowning in debt.

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