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Deferred Payment

Some companies will allow you to defer payment on major purchases for a period of time. For example, you may see a company say that for major items they are offering "no money down" or "90 days good as cash" terms. This means they will let you take the item home now and pay them up to 90 days later. A variant on this offer is the "installment payment plan". The vendor splits the cost of the item into three or four equal parts and lets you pay one installment per month over three or four months.

In most cases no interest is charged, as long as you make all the payments on time (though this should not be assumed--ask). So why do companies do this? Basically, it is done to encourage you to buy an item that you otherwise could not afford to buy. The company is willing to "lend" you the payment money briefly in exchange for getting the sale. This is one reason why it is usually offered on more expensive items.

These deals are great if you find them; certainly take advantage if you can. However, I would encourage you to use them only if you have the money to pay for the item and just want to delay the outlay of your funds. Set the money aside to ensure that you can pay the bill when it comes due. If you can't afford the purchase and go with a deferred payment plan in the hopes that you'll scrounge up the money "somehow" by the time the payment is due, you may find yourself saddled with an unwanted debt--and large interest payments to match. Check that fine print and you may be surprised what interest rate you are on the hook for if you don't come up with the funds when they are due.

Also remember that TANSTAAFL, and this means that sometimes deferred or installment plans have hidden costs. Some companies that offer these as a matter of standard procedure just raise the base price to compensate for slower payment. Some really sneaky ones will not mention interest explicitly, but will say for a $489 item "four equal payments of only $129!" As always, remain vigilant.

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