A recent study conducted by Coresight Research showed that less than one-third of Millenials living in the United States have a major credit card. Why might this be? According to Big Commerce, a negative connotation is associated with owning a credit card among many Gen-Zs and Millenials, who watched their families suffer from cyclical credit card debt during the Great Recession of 2008. Because credit card debt hugely contributed to the struggles faced by many American families during the most recent economic recession, young consumers are more open than ever to alternative payment methods which allow them to buy now and pay later.
What Does “Pay-Over-Time” mean?
“Pay-Over-Time” options are fairly self-explanatory in that they enable consumers to pay for something that they want over time, rather than paying for the total costs of their purchases during initial checkout. When consumers utilize pay-over-time options to purchase products or services, they are able to obtain that which they seek upfront. They will then make a set number of equally-priced payments until they have paid off the total amount of money they owe to businesses or providers.
Why Should Customers Use a Pay-Over-Time Strategy?
Rather than living from paycheck to paycheck, customers who choose pay-over-time options are able to budget their purchases over months or years. This enables buyers to break down their purchases into more affordable payments, giving them financial comfort by reducing their perceived financial risk. While customers may not be able to purchase costly items or services up front, they can generally afford to finance their purchases over the next few paychecks they receive. In fact, many pay-over-time companies require payments to be made every two weeks, which is meant to coincide with incoming work-related wages.
Customers are able to spend more money on orders when they can finance their purchases. This means they can add more items to an order or buy more expensive items if preferred. It is easier for customers to get exactly what they want by upgrading their selections or adding more customizations to the products they are purchasing when they can flexibly break down the repayments of their purchases. Also, paying for purchases over time helps customers acquire goods from companies they had not had access to prior.
Companies that offer customers the ability to pay over time often pride themselves on transparency. These companies, and the businesses with whom they work, contribute to creating an environment in which customers can feel safe spending their money. They are explicit about having no fees, 0% or low-interest options, and even explaining what happens to users’ accounts if their payment is not made on time. For instance, some companies will suspend customers from purchasing new products using their services until they can catch up on late payments. Some buyers may find this policy upsetting because it keeps them from getting items they want or need. Still, it helps many individuals by preventing them from incurring any further debt and tanking their credit score.
It should be clarified that using buy now, pay later companies to finance purchases affects individuals’ credit scores based on whether their payments are made on time. This can either benefit or disadvantage customers based on their financial responsibility. But, pay over time companies do not run hard credit checks before approval, meaning that customers’ credit scores are not diminished when they are trying to qualify for pay-over-time options.
How do Pay-Over-Time Companies Compare to Other Financing Options?
Credit Cards
It is simple and convenient for customers to utilize credit cards because they are a popularly accepted payment method among most companies. They can be used for online and in-person purchases and take seconds to swipe. Individuals’ credit scores and histories are affected by their ability to promptly pay off the debts accrued on their cards. Today, many credit card companies offer sign-up perks or cashback on certain types of purchases. However, these cards are guaranteed to charge customers interest, which can be less than 10% for individuals with perfect credit or over 25% for individuals who have poor credit or lack lengthy credit histories. This makes credit cards an unfavorable option to customers whose credit score’s are less-than-stellar.
Credit companies conduct hard credit checks on applicants who seek to be approved for credit cards, dropping potential borrowers’ credit scores by a few points. This information may dissuade some individuals from pursuing credit cards, even if they had previously been interested in doing so. Credit companies are also suspected of having many “hidden fees” that consumers cannot understand due to the terminology used in the companies’ extensively long contracts.
Personal Loans
Loan providers highly emphasize the need for lendees to have exceptional credit scores and histories. For instance, LendingUSA only approves loans for individuals with a minimum credit score of 620. Like credit card companies, loan lenders do a hard credit check on applicants, which drops prospective borrowers’ credit scores a few points in exchange for providing insightful credit information.
Lenders generally require a minimum loan amount of a few hundred dollars, making microloans inaccessible for individuals seeking them. Some loan providers offer a 0% APR for a set amount of time. Yet, these companies tend to compound interest after that time has passed, punishing individuals who cannot repay the entirety of their loan quickly. This makes loans a less favorable financing option for those who need flexible payment plans options. Moreover, personal loans have high-interest rates and incur fees when payments are made late.
Denefits
Denefits allows patients and customers to finance health, automobile, home improvement, and educational services. Denefits is committed to helping patients and customers access services that may otherwise be out of reach, financially speaking. The services provided by the industries listed above can cost hundreds or even thousands of dollars, whether or not individuals have a medical, car, or home insurance. The inability of individuals to maintain care for themselves and their most costly possessions can lead to expensive consequences. With Denefits, individuals can create and preserve good health for decades.
Unlike other lenders, such as credit and loan companies, Denefits approves 100% of individuals who apply for a payment plan. This company does not check the credit statuses or histories of potential customers. Therefore, individuals who cannot secure personal loans, low-APR credit cards, or other financing options can turn to Denefits to acquire payment options for the services they need.
Endnote
Check out the Denefits website today and find out how you can create a payment plan that will help you get the services you require.
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