The term defer means to delay or postpone something. In finance, defer is usually refers to deferred payment. Deferred payment simply means paying at a later date.

When a vendor allows its customers to defer payment, it means that it is extending its customer a line of credit. The customer, who gets to purchase a product or avail of a service thanks to credit, now becomes a debtor. Depending on the payment terms agreed upon, the debtor then has to pay the vendor either in lump sum or installment. Most often, deferred payment is allowed since the vendor gets to earn extra income due to interest added on top of the original price of the product/service.

In the real world, vendors usually do not extend credit directly to customers. Instead, vendors are paid by credit card companies. Customers then pay credit card companies.

Deferring payments is also used in taxation. Some governments allow deferred payment of taxes for different reasons including (but not limited to) grace periods and installment payments.

Deferred payments are also used commonly used for student loans since most students have no capability to pay their loans while studying. Students usually start paying off loans once they graduate and find jobs.