Real Estate News, Reviews and Investment
Article: advantages and disadvantages of deferred-payment loans.
A loan, rental contract or other agreement with a deferred-payment clause indicates that payment will start at a later date than the signing of the contract. Car loans are common examples – they may offer to defer the first payment for 6 or 12 months.
After payments have begun, they will continue according to the agreement until the contract is terminated, for example when a debt is paid off. Deferred payment is available on many products, from furniture to second homes, but costs can be high so it is important to thoroughly evaluate the alternatives.
Deferring payment is a risk to the party that would be receiving payment as it is possible that the other party may not make payment on time or at all. For this reason, deferred payment tends to cost more than immediate payment.
Advantages of deferred payment loans
Deferring payment can be extremely beneficial, particularly in a situation where income on an investment is delayed. For example:
Disadvantages of deferred payment loans
As payments are deferred, not canceled, there are costs to this service. Disadvantages include: