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Finding the best buy now pay later for you

Buy now, pay later is a popular payment method for many. Learn more about how they work, what to look out for, and what makes the best buy now, pay later provider with our guide.

What is buy now pay later?

Buy now pay later, often referred to as BNPL, order now pay later and get now pay later, can be a cheap and quick way of borrowing money for goods or services.

How does BNPL work?

Instead of paying a retailer for goods or services in full when online or at the till, buy now pay later companies will pay the retailer on your behalf. It’s then your responsibility to pay back the buy now pay later company within the agreed timeframe – usually a few weeks or months. Some companies may even allow you to buy now, pay 12 months later – meaning you can spread out the cost of your purchases.

What you’re buying won’t be cheaper or more expensive; it simply means you’ve got more time to pay it off, which can help with cash flow.

Most online retailers will offer a range of BNPL providers; other highstreet retailers work exclusively with just one provider, meaning you’ll get a limited choice of companies, depending on where you shop.

What is the difference between using BNPL and credit cards?

BNPL providers and credit cards both mean you can shop now pay later, helping you to spread the cost of your purchases; however, they work very differently.

Typically credit cards will have higher credit limits compared to BNPL. You’ll also be expected to pay down your balance every month; in contrast, BNPL providers give you the option to pay weekly, fortnightly or monthly.

Depending on the type of credit card you apply for, you’ll typically be given 26 to 56 days before you start to pay interest on any money you’ve borrowed.

In comparison, buy now pay later companies may give you up to 60 days or six weeks of borrowing interest-free. These periods start from the day you made your purchase. If you don’t make your repayments on time, you’ll likely be charged a late payment fee.

Most BNPL providers will run something called a ‘soft’ credit check on you, which doesn’t leave a “footprint” on your credit file for other lenders to see. In contrast, credit card companies will run a ‘hard’ credit check.

Therefore, it can be easier to access credit with a BNPL service than a credit card, especially if your credit rating is poor.

Another difference is the levels of protection a credit card can provide. Section 75 laws mean purchases over £100 made with your credit card must be protected. If there’s a problem, for example, your goods are faulty, you could get your money back via your credit card provider.

However, Section 75 rules don’t apply when using BNPL to purchase an item. So if you spread the cost of a purchase using BNPL providers, it’s unlikely you’ll be able to call on your credit card provider to pursue a Section 75 refund if your items are faulty.

Will buy now pay later affect my credit score?

Because buy now later is a form of credit, it can impact your credit score. Using buy now later sensibly and repaying on time shouldn’t harm your rating though.

By using buy now pay later, bad credit users could even improve their score if they use it wisely because you’re demonstrating to lenders that you’re a reliable borrower.

However, if you miss a payment or fail to pay back what you owe, a mark may be left on your credit report for up to six years, meaning applying for a loan, credit card or mortgage in the future could prove problematic if you haven’t used BNPL properly.

If your debt is passed on to a debt collection agency, your credit score could be damaged, it’s therefore essential that you never miss a repayment deadline.

What websites let you use BNPL?

Hundreds of retailers now offer BNPL as a way to pay. Examples of buy now pay later websites include;

  • Fashion brands like Asos, Boohoo, Missguided, Nasty Gal, PrettyLittleThing, Gymshark and Nike
  • Home improvement brands like Wayfair, Halfords and Scandibørn

What happens if I don’t pay on buy now pay later?

It could very quickly become costly if you cannot repay your buy now pay later balance on time. Some providers will ask for a settlement fee, or a lump sum of interest may be added to the debt you already owe.

You may also be charged a late payment fee, and missed payments could become a mark on your credit report, affecting your ability to borrow in the future.

It’s therefore essential you set yourself a reminder to make sure you repay on time before interest is added because it could soon spiral.

Is buy now pay later a loan?

Yes – buy now pay later is a type of instalment loan.

It’s an agreement that means you either pay something when you first purchase an item or nothing until later – otherwise known as a deferred period.

Do you have to pay interest when using buy now pay later?

If you repay everything you owe within the agreed time, you won’t usually pay any interest. That’s because these periods are usually interest-free.

If you miss a payment or pay late, your provider may charge you a lump sum of interest of a late payment fee.

Some providers allow you to spread the cost of your purchase over a longer period, but interest may be charged at very high rates – for example, 39.9% APR. This means you’d end up paying a lot more for your goods by the time you’d finished paying off the loan.

What are the benefits of buy now pay later?

Free to use

One of the main benefits of BNPL is that it can be free to use. Klarna, Clearpay and Laybuy don’t charge interest or fees for using their services. Some providers do charge late repayment fees. The idea of spreading your costs for free over several weeks might seem appealing but make sure you’ve got a plan in place for repaying your debt.

Convenient

Buy-now-pay-later providers are integrated into retailers’ websites, making the transaction convenient if you don’t have your credit card handy.

Easy approval

Setting up buy now pay later doesn’t take long, and unlike credit card applications, BNPL providers won’t do a hard credit check before approving you.

Spread the cost

If you need an item before your next payday, BNPL can be useful if you’re short on cash temporarily.

An alternative to credit cards

If you’re someone who frequently uses a credit card to make purchases you otherwise can’t afford, switching to BNPL could save you money on interest charges.

What are the disadvantages of Buy now pay later?

Fees for late or missed payments

If you’re late paying your BNPL balance, you could be charged fees – for example, at the time of writing, Klarna charges a £15 fee for every delayed instalment for goods bought over £200 and ClearPay has a late payment fee ceiling of 25% of the order value.

Negative impact on your credit score

If you delay payments, the BNPL provider may report your behaviour to credit reference agencies. This could negatively impact your credit rating and jeopardise your chances of future borrowing. If you can’t afford an item in the first place, it’s important to consider whether or not you should be taking out credit for it.

Encourages Impulse buying

Unless you’re very disciplined when it comes to spending money, buy now pay later can encourage you to splurge on items you’d not usually buy because you can’t afford to. The psychology of paying later can lull you into a false sense of security, and make you feel like you can afford anything.

Could lead to your finances being overstretched

Some of the items available to purchase with buy now pay later, like makeup, clothes, and electrical items, may feel like small purchases, but the costs can quickly add up, leading to your finances becoming overstretched.

How do buy now pay later providers make money?

Instead of charging you, buy now pay later providers make a commission from goods they help a retailer to sell. One of the main reasons shops and websites like to offer BNPL is because it can help increase their sales.

How is my BNPL spending limit worked out?

Everyone is given a different spending limit – each provider will set a limit based on your credit rating, affordability and their own algorithm.

Some may give you a smaller limit if you’re a new customer, which may increase over time, depending on your repayment behaviour.

Unlike a credit card, your limit is likely to be in the £100s, not the £1,000s.

Is BNPL regulated by the Financial Conduct Authority?

Not all BNPL products are regulated by the Financial Conduct Authority (FCA) under consumer credit regulation; however, all BNPL companies must comply with consumer protection legislation, including the Consumer Rights Act and the Unfair Terms Consumer Contracts Regulations.

The government intends for all BNPL products to be regulated by the FCA in the future.

Can I complain to a BNPL company if I’m unhappy?

If your complaint is about the item you’ve bought, you need to complain directly to the retailer. However, if your issue is with the buy now pay later company, you can make a complaint to Resolver or follow the instructions on your provider’s website.

Are you struggling with debt?

Many people find themselves in debt, including repayment problems associated with short-term lending and BNPL. If you’ve got financial problems that you’re finding difficult to solve on your own, it’s important to talk to a non-profit debt advice agency.

The main ones are;

They’ll be able to talk you through your options and offer free, impartial guidance.

Frequently Asked Questions

Why is Buy Now Pay Later popular?

Buy Now Pay Later is becoming an increasingly popular option for many. One of the main reasons for this is the growing adoption of BNPL payment options by many online and high street retailers and developments in app-based in-store payments.

Does Buy Now Pay Later require a credit check?

Because Buy Now Pay Later is a form of credit, providers will likely perform either a hard or soft credit check before approving your application.

Why am I not eligible for Buy Now Pay Later?

As with all forms of credit, lenders will check your credit score before approving any application. If you have a low credit score or poor credit history, you could be turned down for Buy Now Pay Later.

If you’ve been turned down for BNPL or any form of credit, it’s worth checking your credit report and looking for ways you can improve your credit score.

Is Buy Now Pay Later a bad idea?

Generally, Buy Now Pay Later can be a convenient and flexible way to spread the costs of your online purchases. However, it’s important to remember that BNPL is a form of credit, and you should always consider what you can afford to avoid late payment or interest fees. 

What are the alternatives to buy now pay later?

If you’re not sure whether Buy Now Pay Later is the best option for your circumstances, you could consider an alternative, such as:

  • Saving up and purchasing items later.
  • 0% purchase credit cards – these can be used in most stores and often give you longer to pay before charging interest. 
  • Small personal loans – as with credit cards personal loans will often offer longer repayment periods than BNPL, however, you’ll likely be charged interest.

More Shopping Options

We compare a range of different shopping options to help you find the best option for your circumstances, whether you’re looking for online shopping catalogues, catalogues with credit accounts, buy now pay later or pay monthly catalogues.