Payment in Arrears

Regular payments made at the end of a period are known as payment in arrears. The term is commonly used in relation to pensions, savings accounts, savings plans, loans and leases.

Example 1: Your savings account or pillar 3a retirement account delivers a deferred annual yield of 2%. In this case, you would receive the dividends at the end of every year.

Example 2: A lender allows you to make your loan repayments at the end of each month. So you only need to make your first repayment at the end of the first month.

Contrary to advance payments, the lender receives your payment later, and your debt increases over the month. Loans with deferred repayments are more costly than loans that require advance payments because they acquire more interest.

More information:
Payment in advance explained
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Expert Benjamin Manz
Benjamin Manz is CEO of and an independent expert on banking and finance.