Buy Now Pay Later – The benefits and the drawbacks

What is buy now pay later?

The popularity of buy now pay later has exploded over the last couple of years, and you may have even used one of the companies to make a purchase with. If you haven’t though, you may be unsure of what buy now pay later is and how it can be used.

Most companies now offer some form of ‘buy now pay later’ (BNPL) either at the till or at the checkout. Instead of you paying for the goods there and then, the BNPL provider will pay the retailer for you. You will then agree to pay back the provider over a certain amount of weeks or months, meaning you can ‘spread the cost’ of your shopping.

Why is ‘buy now pay later’ so popular?

The option to BNPL has grown in popularity thanks to sites such as Klarna, Clearpay and Laybuy, making it easy to split the cost of your purchases into smaller amounts. As BNPL can be used for most retailers now, it means that more and more people are spreading the cost of their purchases.

Do they charge interest?

No, and that’s one of the reasons why they have become so popular. You can choose to spread the cost of your purchase without being charged any extra for it.

Do they charge any fees?

If you happen to miss one of your repayments, then you can be charged a late fee after a certain time, however, most of the BNPL providers will give you a small amount of extra time to make the payment before they charge you.

Some of the providers also have a ‘snooze payment’ option, which means if you know you can’t afford the payment at that time, you can delay it. The length of time a payment can be delayed for depends on each provider.

When do I have to make the repayments?

Each provider offers different repayment schedules, so for example with Klarna the payments can be split into 3 payments over 30 days, yet Clearpay is 4 repayments over 6 weeks. You need to make sure you know when your repayments are, to avoid being charged a late payment fee.

Will I be credit checked?

It’s likely that you will have a ‘soft’ credit check performed when you use any BNPL providers. This means they check your address, date of birth and who you bank with. It won’t leave any marks on your credit score.

What are downsides?

There can be lots of benefits to using BNPL if you use it properly. It can make that expensive purchase more manageable for your budget. You need to be careful that you don’t spend too much just because you can pay for it later. Make sure you keep track of how much and when your repayments are, to avoid any late payments fees.

If you find that you are struggling to make the repayments, it’s best to speak to your BNPL provider. Late payments and defaults on your account, can damage your credit score and can even be passed to debt collectors.


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