So, you’re thinking about making payments in installments. This article will cover everything you need to know:
- What is a payment with installments?
- Why pay with installments?
- What are the different installment options?
- Who is Credit Key?
- How is the monthly repayment calculated?
- Who is eligible for installments?
- Does applying for installments affect my credit score?
- How to make a payment with installments in Melio?
What is a payment with installments?
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 that are made with 1 installment.
- You need a verified bank account to make a payment with installments.
- Only a business owner can make payments with installments.
- When you choose to pay with installments for the first time, you start with an application process to be approved by Credit Key.
Why pay with installments?
Paying your business bills with 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.
Control
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 with installments right away.
What are the different installment options?
Melio and our financial partner, Credit Key, offer different installment 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?
Installment payments on Melio are 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, number of repayments you select and the results of your application. The longer the terms, the higher the fees.
It can be up to 24% depending on the number of installments you choose.
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 an installment 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 installments?
Businesses who 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 with installments.
When the business owner applies for installments, Credit Key runs a soft credit pull on their account to check eligibility and make a final installments offer. An answer is almost instantly (in some cases it may take up to 48 hours).
Once a business is found eligible for installment payments, 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 installments, when:
- 1 successful payment was made to this vendor before.
- The user still has a balance on their line of credit with Credit Key
- Every repayment was made on time in the past.
- The credit score hasn’t changed.
Does applying for installments affect my credit score?
No, when you apply for installments, 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. It is solely for informational purposes. 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 installments. 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 make a payment with installments in Melio?
Making a payment with installments in Melio is as easy as making any other payment. Here’s how to do it.