Layaway programs go through 5 steps as follow:

Step 1: Select the item

Firstly, the customer selects the items they wish in-store or through an online channel to put on layaway and brings them to the layaway or customer service department. The items must be on the list that can be purchased on the layaway program as demonstrated by the retailer.

Step 2: Make a deposit

Secondly, if the item is authorized, the retailer will require a deposit from the customers. Some stores require a specific percentage of the full price as a down payment, while others allow the consumers to choose a reasonable amount. Customers can deposit cash through an in-store.

Step 3: Pay remaining amounts

The 3rd step is to decide on the layaway plan’s terms. Depending on the item’s price and the customer’s disposable income, the shop may offer a weekly, bimonthly, or monthly payment plan. According to the agreed-upon layaway plan, customers have to make scheduled payments to pay off the remaining balance of the purchase price.

Step 4: Get the items

Finally, the consumers can pick up the item from the shop once they have completed the planned payments and have a zero balance. Customers may be required to pay layaway costs, which are often a low, flat-rate price for storing things throughout the payment period.

Using a layaway plan can bring huge benefits to the customers. However, it also has some drawbacks that you need to consider:

Pros

• Zero Interest

Customers don’t have to pay interest on things purchased through a layaway program. That makes layaway a more cost-effective choice than using a credit card, which charges customers interest rates ranging from 15 to 25%, and sometimes even higher. Layaway services only charge a small flat-rate service fee to help retailers cover storage costs.

• Easy Acceptance Criteria

Layaway plans, unlike other types of finance, do not have strict acceptance criteria. In contrast to credit cards, retailers do not undertake credit checks. Customers with bad credit or no credit history can participate in these programs because they only ask for identification and a deposit for the goods.

Cons

• Fees

Layaway programs offer free interest. However, most retailers still charge some fees besides the deposit including service fees, cancellation fees, or restocking fees. It can be from 5$ to 100$ depending on each store. Therefore, layaway is not a suitable option for a small purchase. In addition, if you cancel the layaway agreement, you may lose all those paid fees

• Strict payment terms

Customers must make periodic payments within the agreed-upon time frame to participate in layaway services. Customers who break these terms risk losing their stuff and being charged a cancellation fee.

• Potential losses

If you do not complete your layaway agreement, you will not lose the money you paid, but you will have to pay additional fees. For unpaid or canceled layaway agreements, most businesses charge a cancellation fee. Besides, some stores charge an additional restocking fee to put the items back on the shelf.