If you have ever paid only a fraction of what is due for any item, you’ve made a partial payment. In this article, we will discuss what a partial payment is, what situations usually call for a partial payment, and other information.
What is the meaning of partial pay?
Partial pay refers to a payment that is less than the total amount owed. Just as the term implies, it is only a portion of the total due.
Partial payments can occur in different situations where a partial payment is needed upfront. Here are some examples:
Service Orders. This is a common scenario for service providers. The buyer makes a partial payment initially and then gives the remaining balance once the service is complete. Partial pay for service orders encourages service contractors to deliver efficiently and on schedule.
Installment Accounts. When an individual purchases a car, a large home appliance, or gadget, it is common to loan an amount and make payments on the account regularly until the loan is paid.
Revolving Accounts. For credit and home equity credit lines, an individual can borrow up to a specific amount and make partial payments depending on how much is owed.
Real Estate Deals. In real estate deals, the buyer gives a partial payment to cover a part of the whole amount that the property is valued at. The rest of the balance is paid in separate installments or through a mortgage loan.
Mergers and Business Takeovers. In this situation, the buying party may give a partial payment. Doing so provides a cushion or security measure in case there may be unforeseen negative circumstances that occur during the merger.
Are there other names for partial pay?
Yes, it can also be called partial payment, part payment, installment payment, down payment, or upfront payment.
How can partial payments benefit individuals?
For customers, partial payments provide them with an assurance that the service provider will deliver on the agreed service or transaction. For example, a bride pays 50% as partial payment for her wedding dress. The remaining balance will be paid once all the alterations and fittings are completed. This way, the bridal shop will make sure to alter the dress according to plan and finish everything as scheduled so they can collect the remaining balance. Similarly, partial payments allow businesses some assurance in case there will be unexpected circumstances from the customer’s side. Partial payments can improve cash flow and cover business expenses that are needed to work on a project or transaction.
Are partial payments included in an invoice?
Yes, it is essential for all payments to be issued an invoice. No matter how small or large an amount the partial pay is, you have to make an invoice. Keep in mind that the creditor must decide if partial payments are allowed.
When making an invoice payment, be sure to indicate the total amount due and what the down payment is. When customers send a partial payment online, your e-commerce system must indicate that there is still a remaining balance to be settled.
When making an invoice, be sure to indicate all payments. They must be itemized clearly and updated each time a payment is made to avoid confusion.
Here are some examples of how partial payments can be indicated on an invoice:
“50% deposit, balance due on delivery”
“Minimum payment due”
“50% due upon receipt of invoice”
“Remaining balance due in ___days”
“Monthly payment due on ____”
What is the meaning of partial redemption?
When you make a partial payment on a redeemable or callable bond, this is referred to as partial redemption. It means that you are choosing to redeem only part of the issue before its maturity date. Redeemable bonds are usually seen in municipal and corporate issuers.
What are some important reminders about partial payments?
If you are a service provider, the decision to accept partial payments from clients and customers is up to you. If you do decide to accept a partial payment, remember to maintain prompt and constant communication with your clients. Before proceeding with a contract, explicitly state how much down payment is and the payment plan for the remaining balance. Issue accurate invoices so that the customer will not be confused about payment terms.
For customers, be sure to stay on top of your payments. Your payment will not be late if it is made on or before the agreed date based on the signed contract. Making a late partial payment can result in late fees, higher interest rates, discontinued service, and bad marks on your credit report.
In case of an unexpected hardship that will affect your balance payments, be sure to contact your bank or creditor as soon as possible.
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