Interest-Free Option (IFO) VS Deferred Payment Programs

Updated on August 25th, 2021
Interest-Free Option (IFO) VS Deferred Payment Programs

If you bought anything pricier recently, the retailer offered a couple of financial options to make the payout easier. It’s easier for customers to decide to buy if they have multiple payment options, especially for expensive items and services.

Two of the more popular options are Interest-Free Options and Deferred Payment Programs.

Both have their benefits depending on the customer’s financial situation. While they might seem like completely different financial options, both serve the same goal.

In the following article, we’ll explain the difference between Interest-Free Options and Deferred Payment Programs.

What is an Interest-Free Option (IFO)?

Interest-Free Options (IFOs) are payment plans where consumers can pay in installments over a specific time period. Instead of paying the total price at once, the customer pays a fixed portion every month. IFO is usually connected directly to the retailer’s card or the POV (point-of-sale) company offering the service. 

 

Similar to other loan options, consumers will receive an interest rate and repayment schedule if approved for the payment option.

Let’s say a customer buys an item worth $5,000. Instead of paying $5,000 at once, they will pay smaller installments over a set period. In this instance, it can be $500 per month for ten months. But, there will also be a fixed interested rate that varies on the financial provider.

IFOs are helpful if a customer doesn’t have a credit card and feels comfortable paying predetermined monthly payments.

While this is the general definition of an IFO, the interest rate and repayment schedule depend on the financial service company. Additionally, some companies might offer a grace period where if the client repays during a specific date, they won’t pay any interest.

Time Investment Company IFOs

Time Investment offers more flexible IFOs where customers can pay the loan in full without any interest.

If a customer purchases an item or a service from a retailer who uses TIC financial services, their program will start upon job completion or purchase. 

Like with other IFOs, they will pay regular monthly payments that include interest and principle. The principle is the original borrowed amount, while the interest rate is a fixed proportion to the loan.

Let’s say the customer borrows $10,000 and agrees on a monthly payment of $1,000 for ten months. $1,000 is the principle, while the agreed percentage is the interest rate. The interest rate differs depending on the previous agreement.

With TIC, if the customer pays off the entire amount before the promotion end date, they pay no interest. Meaning, if they pay the total loan before the agreed promo end date, they will pay only the principle instead of the principle+interest rate.

If the customer doesn’t repay before the promo end date, they continue paying regular monthly payments like with any other IFO. Finally, interest will still calculate and show on the statement.

What are Deferred Payment Programs (DPP)?

Deferred Payment Programs are an agreement between the lender and the borrower to postpone the initial payment time to a later date. 

As an example, let’s say a customer agrees to start paying their monthly amounts on May 5th. For some unexpected reason, they can’t begin to pay monthly charges on May 5th. The customer agrees with the lender to postpone the date to June 5th, giving them 30 more days to prepare.

The benefit is that customers can get the service or an item without paying anything until the agreed date. If they are in a hurry with roofing or emergency health service, they can get complete service without paying anything to the lender.

DPPs are another financing option that can make purchases more accessible and provide additional flexibility. Similar to IFOs, many DPP types depend on the financial provider. 

Some providers who offer DPPs might still force the customer to pay interest during the deferred period. Meaning, although customers won’t be paying the principle, they will still be paying the agreed percentage. 

Deferred payments don’t harm the customer’s credit history. 

Time Investment Company DPPs

TIC offers multiple deferred payment plans. Customers can decide to push the initial due date to 3, 6, 9, or 12 months. 

This means that customers aren’t required to make a payment until the postponed date. Additionally, they won’t pay any interest until the first due date as well.

 

As an example, let’s say a customer borrows $10,000 with a TIC deferred payment plan. Instead of starting their payments on May 5th, the customer and TIC agree to push the starting date to August 5th. 

 

This means that the customer will get the entire $10,000 amount before May 5th and won’t have to pay anything until August 5th. Interest starts will accrue on the first due date or August 5th in this example. 

Interest-Free Option (IFO) VS Deferred Payment Programs

Customers can decide on an IFO with a deferred payment program. Meaning, choosing IFO doesn’t negate DPP or the other way around.

IFOs provide customers more breathing room when they need to make a purchase. Instead of paying all at once, they can pay in monthly installments. 

But some customers need a specific service right now and can’t afford to wait even though they don’t have the financial possibility to afford the service.

Instead of the retailer refusing to offer the service and losing the customer, they can suggest a deferred payment program. That way, the customer gets the service and the retailer gets paid in full as if the customer had the money to begin with. 

Feel free to contact Time Investment Company customer care for inquiries about payoffs, possible financial plans, and consumer financing for any additional questions.

 

Sara Hafeman
Sara Hafeman

With years of experience in the consumer financing industry, Sara Hafeman currently leads marketing and partner development at Time Investment.