Payment plan

A payment plan is an overview of a series of expected and desired payments for a shorter or longer period in the future.

Payment plans can be used in many contexts and are often created by a creditor, creditor or lender.

The purpose of a payment plan is to ensure that the borrower/debtor is aware of when a payment or installment is due and how much it should be.

Why set up a payment plan?

A payment plan can be an effective tool for creating an overview of future payments - for both debtors and creditors.

A payment plan typically includes information about when a payment is due and how large the amount should be. Most payment plans range from 2-3 payments to payments that span 30 years.

Payment plans can be used in connection with loans or other situations where a lender/creditor wants to give the borrower/debtor a clear overview of future payments.

Amortization schedule

If you have borrowed money from a bank or mortgage company, you will often come across the term amortization schedule or amortization table. This is basically the same as a payment plan - a schedule of individual amortizations (installments).

The purpose of an amortization schedule is the same as for a payment plan: to give both lender and borrower a clear overview of the individual installments.

An amortization schedule is often drawn up when the loan is created. If it is not available, you as the borrower can usually request one.

Read more about installment plans here.

Payment plans and debt collection

Payment plans are a particularly useful tool when it comes to debt collection.

Basically, debt collection is about getting the creditor's money back. If the debtor is unable to pay immediately, an installment plan can be a solution in debt collection.

When setting up an installment plan, it can be beneficial to also create a payment plan. The payment plan shows when the debtor should start making payments, when future payments should fall and how much the amount should be each time.

The payment plan also helps clarify when the debtor is debt-free.

Debt collectors and lawyers often use installment plans, typically in combination with a payment plan.