The Complete Guide to Buy Now, Pay Later Services

The buy now, pay later (BNPL) spending trend is growing in popularity among retailers. Retailers are looking for alternatives to cash and credit cards and BNPL offers that alternative. Consumers who use buy now, pay later tend to be younger, and some don’t qualify for credit cards. Here is a complete guide to buy now pay later services

Buy Now Pay Later Services

Buy Now, Pay Later (BNPL) is a type of short-term financing that allows consumers to make purchases and pay for them at a future date, often interest-free. Also referred to as the point of sale installment loans, BNPL arrangements are becoming an increasingly popular payment option, especially when shopping online. BNPL services provide loans to consumers, letting them pay for something in installments, instead of paying the entire sum upfront. BNPL operates by fronting the money to shoppers and charging them over the course of months. A BNPL company often charges no interest or less than credit cards do.

BNPL financing is a good alternative to consumers, but there are some potential downsides to consider.

Advantages of BNPL

  • Can split up your payments. This might make an expensive item more attainable since you don’t have to pony up a lump sum.
  • There’s no hard credit pull. Unlike applying for a new credit card, BNPLs are easier to qualify for. This means that someone who is new to credit or doesn’t have a strong credit profile might find it more appealing to make a purchase this way.
  • Simple to do. Online shoppers, in particular, may find the immediate gratification of buying what they want in easy-to-understand terms a preferable way to shop.
  • Can help manage cash flow. A BNPL can help someone buy what they need at a payment plan that fits their budget.

Disadvantages of BNPL

There are some potential pitfalls to be aware of with this type of financing offer.

  • Terms may vary. Before committing to a BNPL loan it’s important to know the terms of the deal.
  • There may be fixed fees. These types of programs add a fixed fee to your monthly payments, which can cost you extra over the life of the loan vs. just buying the item outright.
  • Not a credit builder. Paying on time won’t help your credit, but if you pay late this may be reported and have a negative impact.
  • May encourage overspending. The ability to pay off an item over time can make a purchase seem more affordable.

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Types of BNPL Loans

There are typically two types of BNPL Loans:

  • No-interest loans. With these types of loans, the merchant pays a fee to the third-party lending company rather than the consumer paying interest on the loan.
  • Loans with interest. These on-the-spot loans enable the consumer to make the purchase in the moment, but with interest similar to a credit card.

5 Popular Buy Now, Pay Later Companies


Affirm has partnered with multiple well-known brands and may offer customers a choice at checkout of a short-term 0% interest offer or as long as 12 months with an APR ranging from 10% to 30%. There are no late fees, prepayment fees, or deferred interest charges.

If the retailer you’d like to buy from doesn’t already partner with Affirm, you can get a virtual card number from Affirm to make your purchase and pay Affirm back using the payment plan you selected.


Afterpay offers a short-term installment plan through its app. You download the free app to purchase your item using a virtual credit card number and then make the first of four payments and the rest spread out over six weeks. Afterpay will set a limit on how much credit they’ll extend to you, so you won’t overextend yourself.

If you make your payments to them on time, or your account will be paused and you might get hit with late fees that can be as much as 25% of the purchase price of the item.


Klarna’s ‘Pay in 30 days’ allows you to receive your order upfront and get up to 30 days to pay without any interest and fees. In our app you’ll have the option to pay off the balance earlier or extend the due date to a later date for a fee if needed.

If you miss or skip one of your four payments, you’ll be charged a late fee of up to $7.

PayPal Credit

Previously known as Bill Me Later, PayPal Credit offers installment plans on purchases of $99 or more, with no interest if paid in full within six months. Unlike some of the other BNPL plans, PayPal Credit is a line of credit issued via Synchrony Bank so there will be a hard credit check for approval.

If you don’t pay your balance in full, you’ll be subject to deferred interest on the entire amount of the purchases at a rate of 23.99% variable APR.


Zip offers a pay-in-four installment plan, spread out over six weeks. You’ll pay 25% of the total cost of the purchase upfront using your linked debit card or credit card, and the rest of the payments divided into three more installments, each due two weeks apart. Zip doesn’t charge any interest or fees if you make your payments in full and on time.

If you do pay late, you’ll be charged a late fee of either $5, $7 or $10 depending on what state you live in.


Buy now, pay later services can be an effective way to spread out the payment on large purchases. But before you sign on to this service, be sure to take a good look at the exact costs involved. Make sure you are able to pay off the loan in time in order to avoid interest charges and late fees. Read the fine print carefully on buy now, pay later financing so you fully understand the conditions to which you’re agreeing.

Even though BNPL is an available alternative to spending it is important to practice good financial habits by budgeting for your essential and non-essential spending.