Legal Definitions - deferred payment

A deferred payment refers to a financial obligation that, by agreement, is not due immediately but is postponed to a later date or spread out over a period. This arrangement allows the person or entity owing the money to delay fulfilling the payment requirement, often under specific terms and conditions.

• Example 1: Student Loan Grace Period

  After graduating from university, a student's federal loans often enter a six-month grace period. During this time, the student is not required to make any payments on the principal or interest of their loans.

  This illustrates a deferred payment because the obligation to repay the loan exists, but the actual payments are postponed for six months, allowing the graduate time to find employment before repayment begins.

• Example 2: Retail "Buy Now, Pay Later" Offer

  A customer purchases a new appliance from an electronics store that offers a special promotion: "No payments for 12 months." The customer takes the appliance home immediately but does not have to make their first payment until a year later.

  Here, the cost of the appliance is a deferred payment. The customer receives the product upfront, but the financial obligation to pay for it is postponed for a full year according to the store's terms.

• Example 3: Business-to-Business Invoice Terms

  A small construction company completes a project for a client and issues an invoice with "Net 60" payment terms. This means the client has 60 days from the invoice date to pay the full amount, rather than the standard 30 days often seen in business transactions.

  In this scenario, the payment for the construction services is deferred for an additional 30 days beyond typical terms. The client benefits from the postponement, gaining more time before the payment is due.