Payment - Term Overview

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Payment is any action we take to extinguish or cancel an obligation. It's based on the delivery of a good, service or financial asset in exchange for another good, service or financial asset.

In the economic field, we call payment to the transaction (monetary or not) for which a debt is extinguished.

That is, when we make a payment what we are doing is finishing the last part of a transaction, in which a service has previously been provided or a merchandise has been delivered, so it's the consideration of the good or service.

Payment types

It can be done at the time of provision, or be delayed.

For example, in large companies it's usually paid in 30, 60 or 90 days, and during this time, there would be no debt, since they have allowed us to delay payment later. There would be a debt if, once the obligation (loans, invoice, etc.) is due, we have not canceled it.

Payment can be made in various ways, the most common being the monetary transaction (sending money). With the monetary transaction we put an end to the obligation, although the action of paying can also be carried out through the delivery of a good or asset, which we assume has a value similar to the obligation contracted.

In this case, we can call it dation in payment, and it's used sometimes when there are financial problems, for which we don't have liquidity or our equity is less than the amount of the debt. This case occurs, for example, when we hand over the keys to our house as a method of payment for a mortgage that we cannot continue to pay. The fact of giving an asset (our home) could cancel the mortgage debt, if so stipulated in the contract.

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