Deferred Payment

A deferred payment option is a legal right to postpone strategically (delay) payout on funding to a later date. Due to its more intricate construction and a higher level of illiquidity compared to its plain vanilla equivalents, deferred payment options are a sort of exotic option in the options market. The bulk of investment instruments in the financial sector that is focused on retirement investing has deferred payment choices built into them. Deferred payments are another possible clause in a loan or mortgage contract.

In order to prepare for greater illiquidity than is usual for regular investments, the investor who will be receiving payments must choose a deferred payment option.

Many investors will typically choose to invest in deferred payment instruments across the spectrum of the investment industry since they have some long-term advantages. Borrowers may be given a choice to postpone payments by lenders in extraordinary circumstances, such as hardship or scholastic responsibilities.