The holiday season is fast approaching. It’s almost time to start checking that list (twice, of course). And when you do, you might be tempted to splurge on a gift purchased via a layaway plan. The temptation of layaway plans might never be greater. The pandemic has made life pretty hard; it’s natural to want to go above and beyond this holiday season. However, before you sign up for one of these plans, here is what you should know.
A layaway plan is an installment payment plan, where you pay for an item in increments spread out over months or even years. You must pay all the installments in order to receive the item.
These plans are designed for people who want to purchase an item, but just don’t have the cash on hand. You might also opt for a layaway plan if you think the item will be gone by the time you have enough money to purchase it.
The main benefits of a layaway plan is that you can spread out your payments. There is also no credit check and usually no interest is charged.
As US News notes, layaway plans often come with fees that make the item more expensive. This is especially true for smaller purchases. If you use a plan with a $10 fee to buy a $50 blender, you’re adding 20 percent to the total cost. You might also have to pay a cancellation fee if you end up not being able to make all the payments. The payment plan is also strict, so make sure you think carefully about your ability to follow through. In the end, it might make more sense to save up for the item before you buy it so you don’t have to deal with fees and payment rules.