Monthly payment

economic-dictionary

A monthly payment is a payment or allocation of money that is delivered in periods of months, which can be indefinite, or have a limited time.

You have probably heard the concept of monthly payments in school, or when talking about an allowance that parents give to their children. Well, both correspond to this concept and refer to the delivery of a monetary allowance, once a month, for a specific or indeterminate period of time, for the concept of a payment awarded for a service, or acquired right.

Types of monthly payments

The monthly payment is a way to pay. Either because it was agreed between two parties, or because a third party determined it that way.

Here are some types of monthly payments.

  • Rent: The payments for the rent of a house, generally are monthly. It is agreed between both parties and a payment date is established. This is based on a rental or lease agreement, which defines the period during which the tenant will occupy the home.
  • Child allowance: When the parents do not live together, a family court determines that one of the two must deliver a monthly allowance to the other for living expenses, food, clothing and others. This type of monthly payment and its amounts are determined by a judge.
  • Tuition: It is an expense that is paid every month and for which parents pay for the education of their children. University fees can also be included in this item, which although they are indicated in annuity, due to their high prices, are paid by students on a monthly basis, either on their own account or through credits.
  • Bank loans: Debt has found in the monthly payment a way to make people get loans of various kinds; mortgage, consumer, education, among others, and that, under the acceptance of certain interest rates, can be paid month by month.

Importance of the monthly payment method in the economy

The monthly payment method brings dynamism to the economy. This, since it fragments a large payment into several parts, which allows cash flow to be generated in various economic sectors.

For example, if the payment of a rent were made on an annual basis, it would be impossible for many people to rent a home. On the other hand, since it is monthly, it not only opens the possibility for many people to move from their places of origin in search of opportunities, but also, that monthly payment allows the landlord to use that money for different expenses.

Among these expenses can be found the expense in supermarket, shops, warehouses, fuel, among others. In this way, distributing that monthly resource in various sectors of the economy that are sustained by that money.

Monthly payment in business models

One business model that has taken advantage of monthly payments is subscriptions. A model that executes the sale once and then earns income every month, which has historically attracted the attention of various industries. First with the subscription of newspapers and magazines, and more recently, with Netflix and Spotify, who have been enriched thanks to these low-priced monthly payments.

In short, a monthly payment facilitates the acquisition of goods and services, as well as the fulfillment of obligations to a person. Sometimes, charging interest every month, but that serves to pay for operational expenses and feed a long-term business model, such as retail and banks, and on the other hand, penalizes the delay or non-payment of said obligations on time.

Tags:  opinion Argentina accounting 

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