So, you’re thinking about making payments in monthly installments. This article will cover everything you need to know:
- What is Pay over time?
- Why should I pay over time?
- What are the different repayment terms?
- Who is Credit Key?
- How is the monthly repayment calculated?
- Who is eligible for Pay over time?
- Does applying for Pay over time affect my credit score?
- How to make a payment with Pay over time in Melio?
What is Pay over time?
It’s a flexible way to make a bill payment. The vendor gets paid in full upfront and you repay in Net 30 or monthly installments over time.
Some important things to keep in mind:
- Installments carry fees. Read more about how the monthly repayment is calculated.
- There’s fixed fees of 2.5% for payments made with 1 installment.
- You need a verified bank account to make a payment in installments.
- Only a business owner can apply for Pay over time and make payments in installments.
- When you choose to pay in installments for the first time, you start with an application process to be approved by Credit Key.
Why should I pay over time?
Paying your business bills in installments has 3 significant advantages:
Better cash flow
Keep more money in your bank account for longer. Even if you are in a crunch month and need to invest more upfront, or if you are in the off-season and have less business. Spread out your repayments so that you always have enough cash on hand.
Pay on your terms. Your vendors and suppliers still get paid on time, the way they prefer. And you choose how many months you need to repay.
Quick application process
In just a few minutes, you can apply and confirm your eligibility. So you can make your first payment in installments right away.
What are the different repayment terms?
Melio and our financial partner, Credit Key, offer different repayment terms. The number of installments may vary depending on the payment amount and the results of the application:
- 1 installment (Net 30)- Repayment will be deducted 30 calendar days after the payment was sent to your vendor.
- 2 installments- The bill amount is split into 2 repayments. Every repayment will include the total amount plus the fee divided into 2.
- 3 installments - The bill amount is split into 3 repayments. Every repayment will include the total amount plus the fee divided into 3.
- 6 installments - The bill amount is split into 6 repayments. Every repayment will include the total amount plus the fee divided into 6.
- 9 installments - The bill amount is split into 9 repayments. Every repayment will include the total amount plus the fee divided into 9.
- 12 installments - The bill amount is split into 12 repayments. Every repayment will include the total amount plus the fee divided into 12.
The 1st repayment will be deducted 30 calendar days after the payment was sent to your vendor.
From the 2nd repayment on, every repayment will be deducted 30 calendar days from the previous one.
Who is Credit Key?
Pay over time on Melio is powered by Credit Key, Melio’s financing partner. Credit Key provides financing for businesses.
How is the monthly repayment calculated?
The total fees for your repayments are a percentage of the total bill amount, the number of repayments you select, and the results of your application. The longer the terms, the higher the fees.
The fees are divided into the number of repayments. So for example, if you selected terms of 12 repayments with 24% fees, your monthly fees will be 2%.
Your monthly repayment includes the total bill amount plus the fee divided by the number of installments.
Here’s an example:
- Bill amount is $1200.
- You select a repayment term of 3 installments for a fee of 6%.
- The fee for the total bill amount is $72.
Your monthly repayment is: ($1200+$72)/3 = $424 per month.
Who is eligible for Pay over time?
Businesses that meet certain eligibility criteria that include, among other things, previous payment history and other credit and risk factors, will be presented with the option to pay over time.
When the business owner applies for Pay over time, Credit Key runs a soft credit pull on their account to check eligibility and offer final repayment terms. An answer is almost immediate (in some cases it may take up to 48 hours).
Once a business is found eligible to pay over time, it doesn’t need to apply again. From the 2nd payment on, every specific payment will be checked and approved separately.
A payment is eligible for Pay over time, when:
- The account still has a sufficient remaining balance with Credit Key.
- Every repayment was made on time in the past.
- The eligibility status hasn’t changed.
Does applying for Pay over time affect my credit score?
No, when you apply for Pay over time, Credit Key runs a soft credit pull on your account.
A soft credit pull is made to better understand how you are managing your debt. Credit Key will check your credit report - for example, they can check the number of late payments, credit usage, loans you took, and money you borrowed- as part of the background check before approving your business for Pay over time. The purpose of it is to decide how likely it is for them to get paid back by you.
The most important thing to remember is that soft credit pull doesn’t affect your credit score.
How to Pay over time in Melio?
Pay over time in Melio is as easy as making any other payment. Here’s how to do it.