You might have come across a ‘buy now, pay later’ (BNPL) deal and thought long and hard about going for it. After all, the thought of receiving something now and figuring out how to pay for it in the future is a tempting proposition. The prevalence of BNPL deals has made higher value products available to a wider marketplace. But are they worth it? Below, we look at everything you need to know about BNPL deals and help you decide if it’s the best way to finance a purchase.
Buy Now, Pay Later: What you need to know
If you’re looking for a product online, you’ve probably noticed a tab pop up that invites you to buy it now and pay later, typically in instalments. It’s a quick and easy way of accessing credit and is provided by companies like Klarna and Clearpay.
It allows people to buy items without actually having the means to pay for them, much like a credit card. You can then spread your repayments over several months. You will find BNPL deals on things like sofas, beds, and various appliances.
How it works in practice
Most BNPL deals offer you a variable repayment period between 1-12 months. You can also select how regularly you make the repayments, whether it’s every week or month, for example.
Some deals offer you an interest-free period at the start of the repayment period, but it really just depends on the terms of the company offering the scheme. In some instances, you might find that you can buy a high-value item without incurring any interest at all, which is great if you’re looking for a way of managing your cash flow.
BNPL providers tend to strike deals with retailers that see them take a cut of the profits from items that they help to sell. This is primarily how they make money, as they essentially make higher-value products more accessible to a wider marketplace.
Ultimately, if you stay on top of your payments and don’t incur late fees, BNPL schemes can be a decent option.
Do Buy Now, Pay Later schemes influence credit rating?
At its core, a BNPL scheme is a form of credit. As such, there’s a chance that you might be rejected if you don’t have a great credit score. If you’re approved, you need to make sure you make your repayments as scheduled, as missing them can negatively influence your credit score.
BNPL providers can file details of late or missed payments with the relevant credit agencies, so it’s not something that you should take lightly. Failing to meet the agreed repayments could affect your credit applications in the future.
Is a Buy Now, Pay Later scheme right for you?
It’s easy to see why BNPL schemes are attractive to some people. After all, it’s an easy way to access credit. However, before you commit to such a payment schedule, consider:
- Although the price of the item might seem cheaper (ten monthly payments of £10 sounds great), it will still cost you £100! Don’t fall into the trap of thinking you’re saving money.
- BNPL schemes might encourage you to buy objects you don’t actually need, just because you can afford the repayments. Make sure you need the item before committing to a purchase.
- Review the terms and conditions and look for interest payments and late fees in particular. You could end up paying a lot more for the product if you don’t keep on top of your payments.
What’s a good alternative to BNPL?
If you’re looking for cash to buy something online that you need, then applying for a personal loan is a potential alternative to a BNPL scheme. Koyo Loans are typically approved within one day and come with clear interest and repayment terms. We offer personal loans between £1,500 and £12,000. 24.9% APR Representative. Use our loan calculator to find out how much you could borrow today.