What Is Buy Now, Pay Later?
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 "point of sale installment loans," BNPL arrangements are becoming an increasingly popular payment option, especially when shopping online.
Buy now, pay later arrangements are point-of-sale installment loans that allow consumers to make purchases and pay for them at a future date.
Consumers typically make an upfront payment toward the purchase, then pay the remainder off in a predetermined number of installments.
Buy now, pay later plans often don't charge interest and are often easier to get approved for than traditional credit cards or lines of credit are.
Normally, BNPL doesn't affect your credit score; however, late payments or failing to pay can damage your credit score.
Like its name suggests, "buy now, pay later" lets you make a purchase and receive it immediately but pay for it at a later time, usually over a series of installments.
Though this type of payment plan has been available for years, it exploded in popularity during the pandemic as more people shifted to online shopping.
You can use a buy now, pay later plan at most major retailers, but whether you should depend on the plan and your financial situation.
Understand How Buy Now Pay Later Model Works & Benefits
Buy now, pay later programs aren't all the same. Each company has its terms and conditions, but generally, point-of-sale installment loans operate along the following lines:
You make a purchase at a participating retailer and opt for buy now, pay later at checkout.
If approved (you're told in seconds), you make a small down payment, such as 25% of the overall purchase amount.
You then pay off the remaining amount due in a series of interest-free installments.
You can pay via a check or bank transfer; payments can also be deducted from your debit card, bank account, or credit card automatically.
Although they both involve delayed payments, BNPL is different from purchasing with a credit card. When you use a credit card to pay for things, you're only required to make the minimum payment due on the card each month.