How can I use layaway plans for budgeting?

By Ayton MacEachern AAA
A:

Layaway plans are a way to buy larger items without having to come up with the entire cost at once, and without paying the exorbanant interest fees associated with most credit cards. Many stores will even allow you to put an item into layaway with no fees. Obviously, the disadvantage of layaway is that you cannot have the item you purchased until it is paid off in full. However the many advantages (such as no interest, fixed future price and no-risk of default over a missed payment) is often more than enough to outweigh the credit card interest that can be avoided. As well, layaway plans report to credit bureaus, so paying off your item over a series of equal installments is a great way to add another good reference to your file. (Read Consumer Credit Report: What's On It to take a closer look at the various components and considerations of the personal and financial data that go into this dossier.)

For many, layaway plans are used as a budgeting tool. Instead of trying to save for an item in your own account, the layaway plan is a forced savings program which has to go towards the purchase, and cannot be used for something else. By adjusting your household budget to allow for the layaway payments, you are getting into the habit of saving a regular amount. When the layaway payments have ended, you already know you can afford them, so you might as well continue the payment into your own savings account.

For their forced savings, no interest and lower-risk advantages, layaway plans are a great way to obtain the larger items you may require without having to borrow the money. With no interest, this will be much quicker than the same payment against a store credit card.

This question was answered by Ayton MacEachern

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