How Does a Deferred Payment Work?

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People who want to do business together sometimes can’t make a transaction happen because one person doesn’t have the money at the time of the deal. To close sales, a seller -- an individual or a company -- might offer the buyer the chance to pay later, or defer payment.

Deferred Payment on Purchases

There will be times when you want to buy something, but you won’t have the money until later, such as when you get your allowance or receive your next paycheck. If you have a good relationship with a seller or good credit, ask to defer payment and settle the debt at a specific date in the future. Stores frequently offer deferred-payment promotions to increase sales, letting you take an item home and start paying for it 30 days to three months down the road. Many colleges offer deferred payment of tuition, fees and other school expenses.

Deferred Payment on Labor

There may be times when you want to work for a business, but they don’t have the cash to hire you. If the work you do helps bring in revenue, you can work out an arrangement to defer payment of your wages until the company can pay you. Whenever you agree to a deferred payment agreement, get the deal in writing, including payment dates.