---
title: "What is a Payment Plan? - AR Dictionary"
description: "A payment plan is a written agreement to pay an overdue or large invoice in installments on set dates. See how it differs from payment terms and settlements."
url: https://www.paidnice.com/dictionary/payment-plan
---

# Payment Plan

## What is a payment plan?

**A payment plan is a written agreement that lets a customer pay an overdue or large invoice in fixed installments on set dates instead of in one payment.** The full balance stays owed. The plan changes when each part is due, and it usually names a deposit, the installment amounts and dates, and what happens if one is missed.

A payment plan is agreed for one balance. [Payment terms](https://www.paidnice.com/dictionary/payment-terms) are the standard due date on every invoice, and a settlement is an agreement to accept less than the full balance. When a customer misses an installment, the plan becomes a [broken payment arrangement](https://www.paidnice.com/dictionary/broken-payment-arrangements).

A plan suits a customer who accepts the debt and cannot pay it in one go. It does not suit a customer who disputes the invoice or has stopped replying. Any interest or late fee on the overdue balance continues unless the agreement says otherwise, so the agreement should state what happens to it.

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