How Does Layaway Work?

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Whether you're shopping for the holidays or everyday purchases, you might want a way to secure some merchandise without having to pay all at once or use credit. Layaway programs allow you to put some items on hold for a period of time while you make regular payments to pay off your balance. These programs can come in handy if you're shopping for something that might sell out, and it can be less expensive than paying credit card interest. However, layaway is only available through select retailers and does have some fees and terms to consider.

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What Does Layaway Involve?

When using layaway, you first shop at a participating store online or in person for merchandise that's eligible for the program. Some stores set a minimum purchase amount, limit layaway to certain merchandise like electronics and clothes or only offer layaway during the holiday season. After you've finished shopping, you'll usually go to a counter reserved for layaway customers if you're shopping in person or select the layaway option at checkout when shopping online.

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The employee or website sets up a layaway contract detailing how long the program runs, how often you'll make payments, how much the payments are and how much you'll be putting down as a deposit. The plan types and terms can depend on the amount purchased, the store's policies and your financial situation. For example, the store may offer a ​12-week​ layaway program with a ​10 percent​ down payment and the remaining payments made every ​two weeks​. You'll usually pay a small service fee to set up the plan, but you won't pay interest or face a credit check.

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You'll need to keep up with your payment plan to avoid having the layaway canceled and paying a cancellation fee. If you fall behind, the store may give you a grace period to catch up before you lose the items and get your payments (minus the cancellation fee) refunded to you. At the same time, you can usually voluntarily cancel if you change your mind. Otherwise, once you have made all your payments, you'll be able to go to the store and collect the merchandise.

Which Stores Offer Layaway?

While layaway used to be available through many large retailers, its popularity has declined as more people use credit cards and as stores like Walmart and Target turn to third-party financing options like Affirm, or offer in-house financing. However, some stores still offer layaway programs:

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Consider also​: What Does "90 Days Same As Cash" Mean?

Deciding to Use Layaway

If you're considering using layaway at one of the select stores, you do get several benefits. For example, you can shop ahead for Christmas and secure popular items that might quickly sell out without having to turn to using credit. The ability to get a layaway plan without undergoing a credit check can help you out if you can't qualify for traditional financing options. There's also the benefit of knowing for sure how much you'll pay for everything in advance since the store will clearly include all fees in the layaway contract.

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However, layaway plans also come with limits that especially become a problem when you need merchandise that doesn't qualify or that you need right away. In that case, you might have to shop for alternatives or consider other types of financing like credit cards. And while you won't pay interest, you'll need to consider other financial implications such as plan fees, cancellation charges and the possibility that any refund might be in store credit rather than in cash.

Overall, deciding to use layaway can provide convenience and payments that fit your budget, but you'll want to make sure to follow the terms of your plan to prevent issues.

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