An arrangement where a seller provides funding directly to the buyer for the purchase of a good or service, rather than the buyer obtaining a loan from a traditional lending institution, such as a bank or credit union, is an alternative financing model. This type of agreement is frequently seen in real estate transactions, vehicle sales, or retail purchases where the seller aims to facilitate a sale by offering payment options to a broader range of potential buyers. For example, a car dealership might offer payment plans to individuals with less-than-perfect credit, bypassing the need for the buyer to secure an external auto loan.
This method can offer several advantages. For the seller, it can expand their customer base by making their products or services accessible to individuals who might not qualify for conventional financing. It can also generate additional revenue through interest charges and fees associated with the payment plan. Buyers may find it appealing due to potentially more flexible qualification requirements and faster approval times compared to traditional lenders. Historically, such arrangements have been employed by businesses seeking to stimulate sales and maintain control over the financing process.
