Deferred payments have to do with debts that are created today but are not due for payment until some agreed upon date in the future. The future process of payment may involve settling the entire debt on or before a specified date, or may be structured by commencing installment payments that will be begin on a specified future date and continue until the debt is fully retired. Use of a deferred payment strategy allows the debtor to receive the benefit of a good or service now rather than having to pay for the service in full at the present time.

The use of a deferred payment model is considered one of the more common sales and marketing tools used by many companies. Essentially, the underlying concept is to buy now and pay later. When a consumer is unable to pay for the purchase today, but has a reasonable expectation of being able to provide payment in full by an agreed upon date in the future, the process of assuming deferred debt simply makes sense.

Vendors who choose to extend deferred payment options to customers normally make use of some type of qualification process. The customer may have a long-standing relationship with the vendor, and have an excellent payment record. Prospective clients may undergo credit checks and other background checks to ensure that there is a reasonable expectation that the deferred pay date for the debt will not pass without the receipt of the payment. In both cases, it is not unusual for the deferred payment plan to not include interest charges, provided the balance is paid according to the terms of the plan. However, if the buyer fails to pay the deferred payment according to terms, the vendor at his or her discretion may begin to apply interest charges to the outstanding balance.

The use of a deferred payment model is common with many types of businesses. Some mail order based businesses offer a deferred payment plan to preferred customers. Local businesses such as furniture stores may offer a deferred payment plan that allows the customer several months to pay off the outstanding balance before the plan converts to a traditional revolving credit account and begins to generate interest charges. For consumers who can pay off the balance on or before the date specified in the deferred payment agreement, the arrangement is a great way to acquire goods and services without having to pay any type of finance charges.