Buy Now, Pay Later (BNPL) is a type of finance that allows you to purchase an item or service upfront and then spread repayment over several installments. Essentially, you are able to buy the product now and pay for it later – and it is predominantly an online industry. There are a number of companies that facilitate this form of finance including well-known Swedish brand Klarna, PollenPay, Laybuy and more.
What is Buy Now Pay Later Typically Used For?
Buy now pay later is often used for purchasing:
- Electronic goods
- Hotels and holidays
Does Buy Now Pay Later Have Charges?
Charges depend largely on the BNPL provider as whilst some carry out the service free of cost, others add interest. Costs may also depend on the payment method the customer has chosen, or the length of time the consumer wishes to repay back the money. For instance, some offers allow borrowers to spread the cost over a long period but interest may be high at around 39.9% APR.
Why is Buy Now Pay Later So Popular?
Buy Now Pay Later is very easy to use and tends to have low minimum spends too. Companies have made this type of finance popular amongst younger consumers, with slick ad campaigns often targeting people on social media who may not be able to afford certain items, so this gives them the push to do so.
Can Buy Now Pay Later Affect Your Credit Rating?
Applying for most Buy Now Pay Later agreements should have no impact on your credit rating as they usually only involve a soft credit check. However, missing repayments can lead to both a penalty fee and damage to your credit rating. A low credit score could then hinder any future applications you make for products such as a mortgage, loans or credit cards.
What Are The Benefits And Dangers Of Buy Now Pay Later?
Buy Now Pay Later has fantastic benefits as it is easy and convenient for consumers and retailers alike, is usually interest free and considers all types of credit scores. However, it can be hard to track all your payments, missed repayments can lead to fees and no rewards, miles or cash back are offered.