A layaway plan lets buy a product from a store that you will pay off over time. This is a great option for buying higher ticket items if you don’t like to add to your credit card debt or you lack sufficient disposable income.

It was during the time of the Great Depression when the concept of layaway was introduced for the very first time when cash was quite tight and it was impossible for most consumers to pay for their purchases in full. Layaway gave people the chance to pay for products in installments and get them after paying it in full.

Once the 1980s came and credit cards were introduced, the popularity of layaway plans dwindled. But, the 2008 financial crisis sparked the resurgence of layaway plans. Years after this, retailers start reviving their layaway programs that were once dormant.

Stores such as Sears, K-Mart, and Walmart are just among those known to offer layaway. Just recently, many online retailers also started to provide layaway plans to further expand available options.

How Does Layaway Impact Credit?

Since layaways are not linked to your credit card, this doesn’t get reported to credit bureaus without affecting your credit at all. It can be an excellent choice if you have a low credit score and you don’t want to further put your credit health at risk. Aside from that, a late or missed payment will not necessarily affect your credit as it will only affect your potential ownership of the product.

However, It might hold you back if you have a plan to build credit. Even though this option might be an easy way of paying for items, particularly if you are sure that you could handle all the payments, this might be a missed chance of boosting your credit.

For instance, if you use your credit card to buy an item and you pay off the full amount instead of going for a layaway plan, this will reflect well on your overall credit health and can help improve your score. Simply put, while layaway plans have no direct effect on your credit, make sure you weigh your choices to determine if this is the best option for both you and your overall credit health.

How does It work?

There are little to no requirements to be qualified for layaway. You could sign up using your ID alone and some sort of a deposit that is often a portion of the item’s price or the store’s set flat rate. You are not obliged to present your credit score or let the retailer carry out a hard inquiry. This makes layaway the best choice for people who have low score, little credit history, or credit issues. Although every plan may differ from one store to another, the basics of this practice are almost similar across the board.

If you have always wanted to buy that high priced item that is not within your reach just yet, a layaway plan might be your best option.