A Guide To Buy Now Pay Later Catalogues
Buy now pay later isn’t new. If you’ve bought furniture, electronics or even a holiday in the past few decades, chances are you’ll have been offered it as part of your credit agreement. But buy now pay later is changing. It no longer applies just to big ticket items like your new sofa or cooker. And it’s easier than ever to get the credit.
So what do you need to know about the new state of BNPL? And what do you need to be wary of?
How is buy now pay later changing?
BNPL has evolved. On the high street and online, it’s no longer just about big ticket items. You can take advantage of buy now pay later clothes and shoes, fragrances, toys, games and much more. And there’s one name above all others driving the boom in buy now pay later: Klarna.
What is Klarna?
Klarna is the Swedish buy now pay later app that acts like a credit card without the card. Buy from any participating online retailer and you can quickly and easily spread the cost of your purchase. Spread the cost for 3 months (which is what Klarna defines as buy now pay later) and you pay no interest. Spread the cost for longer (up to 36 months) under what Klarna then calls a ‘planned purchase’ and you do.
Is Klarna an expensive way to borrow?
Like many forms of credit, Klarna buy now pay later isn’t expensive providing you stick to the rules. In fact, pay each purchase off with three months and it’s free (Klarna makes its money from retailers, not customers). It’s only when you start missing payments that things can start to add up.
Is Klarna the only buy now pay later provider?
No. There’s been an explosion in buy now pay later companies. Most operate in a similar way to Klarna, but there are subtle differences:
Other Buy No Pay Later providers
Buy now pay later with Laybuy offers 6 weeks to pay on items bought instore and online with no interest, ever. Although late payments will attract a fee, Laybuy freezes any late accounts so you shouldn’t risk a debt spiral.
Where interest rates are applicable Affirm places them upfront so you will always see the full price you’ll pay from the outset. Affirm never charges late fees.
Openpay lets you spread payments into 3-7 equal monthly instalments. How long you get depends on what you buy. It’s interest free as long as you make payments on time. Late fees are capped at £15 per plan.
Zilch gives you 6 weeks to pay and splits your payment into four interest free chunks during that period. To protect you from spiralling debt, credit limits are controlled. If you want to make a larger purchase Zilch will let you spread some of it (up to your limit) and take the rest from your credit card. It’s accepted at 5,000+ online stores including Amazon.
Your payments are split into 4 equal fortnightly interest free chunks (the first of which you make when you buy). The Zip credit limit is a little higher than some (up to £1,000). Missed payments carry a £4 fee and you’ll be charged a further £4 every week the payment is outstanding.
PayL8er is a combination of short term interest free or longer term interest-based payments, with the amount you’ll pay clearly shown when you buy. Late payments will attract interest until cleared.
Splitit’s approach differs slightly from its competitors. You pay on your existing credit or debit card but Splitit splits the cost of the purchase into three interest and fee-free monthly payments, without additional registrations or application. There are no late fees either.
Is there a buy now pay later credit check in the UK?
There’s usually a ‘soft check’ for short term arrangements. Soft checks don’t affect your credit rating (as they aren’t related to a specific application for credit). This contrasts with hard checks (which you’ll face when you apply for other forms of credit, and for more traditional forms of financing available through buy now pay later companies). Hard checks stay on your file for a little over two years.
What happens if I miss a buy now pay later payment?
Depending on the buy now pay later company, you may have a late payment fee added to your next bill and they will aim to collect the payment (plus the fee) with the next scheduled payment. If you miss several payments you may have the facility to use the service withdrawn and, in extreme cases, the company may use debt collection services to collect the debt.
It’s fair to say the providers have worked hard to be as fair and transparent as possible, with some lenders offering a ‘snooze’ facility to give you an extra few days to pay without penalty. Others (such as PayL8er) take no action as long as you make up the payment in 14 days.
Will a missed payment affect my credit rating?
Each provider operates slightly differently so you would need to check the specific details with your provider. To take Klarna as an example, the company says it does not currently report missed payments to its buy now pay later service to UK credit agencies. Like all other companies, it does reports late payments of its longer term (6-36 month) financing deals.
You need to be clear, therefore, about the type of arrangement you’re entering before you sign up. You also need to read the BNPL companies’ T&Cs because some may report missed payments.
Are buy now pay later apps popular?
Yes! Especially amongst younger shoppers (millennials and Gen Z). During the pandemic their use increased by 35%, The Guardian reported.
What’s the problem with buy now pay later apps?
You may have seen news stories recently where some MPs have compared Klarna and other buy now pay later providers to the next ‘Wonga in waiting’. There has been some concern that the popularity of the new buy now pay later companies is causing problems.
There worries are that:
- The easy availability of credit is encouraging people to spend more than they can afford
- Regulation has not kept pace with the changing credit landscape
- Not enough is being done to protect consumers
- BNPL is being marketed as a lifestyle choice
The FT reports a recent Which? survey that found 24% of BNPL customers spent more than they planned. In the industry’s defence, current defaults on BNPL accounts seem low. In the same article, Klarna said its default rate was less than 1%, lower than the average for credit cards. Some of the companies put a freeze on purchases until missed payments are resolved (Laybuy, for example). And you don’t have to look hard for BNPL companies that welcome greater regulation.
Buy Now Pay Later Pre-Klarna
Not so long ago, you’d typically find buy now pay later deals in two main areas. Stores like Currys, Argos and DFS would offer buy now pay later as part of their credit deals to entice you to sign on the dotted line for the laptop/sofa/TV now. Sign up, and you could take the item away today secure in the knowledge that you could pay back monthly and that your formal monthly payments wouldn’t start for several months.
Pay back the credit before the official payment start date and you could, depending on the deal, avoid interest payments altogether.
These buy now pay later deals for furniture and electronics are still extremely common.
Buy now pay later catalogues are another classic source of BNPL, with low monthly payments, free delivery (with some companies) and generous pay later dates that mean you can spread repayments easily.
Very’s buy now pay later catalogue remains a hugely popular choice, and you can find more buy now pay later catalogues here.
>List BNPL catalogues
Buy Now Pay Later (BNPL) works by letting you to make purchases without having to pay the total sum upfront. As an alternative, you can delay the payment or spread is over durations from 30 days to 36 months, at a time more suitable for your finances.
In stark contrast to old-fashioned credit preferences, numerous providers who offer such types of payments do not ned that you pay interest in addition to the principal amount. Nevertheless, in certain cases, you may need to pay your initial instalment as a deposit at the purchase point, as well as interest and defaulting fees in case you miss any repayments.
Is buy now pay later a good thing?
Buy now pay later can be a great, interest-free substitute to a credit card in case you keep up with your repayment terms. However, you could default your credit score if you fail to use the credit sensibly, amounting in defaulting fees as well as impacting your capability to borrow money down the road.
Can you repay BNPL schemes before the due date?
Most companies providing the choice to pay later do not charge any Early Repayment Charges or additional fees for settling your balance early. This means that should you wish to do so you will be able to repay your outstanding balance whenever you like.
Why might my application be turned down?
There are numerous reasons due to which those who apply for credit have their application refused. However, it can be puzzling when you are unsure why. Here are the commonest reasons why credit applications may be rejected:
- Different billing and shipping addresses
- Errors on applications
- Not being able to verify personal information
- Inability to afford the repayments
- A poor credit report
- Missed repayments in the past
If you have a poor or thin file credit report or missed credit repayments and are looking to borrow money — you may think about repairing your credit prior to applying. Then again, you may get in touch with the lender or credit broker to ask why your application was rejected.
Do I need a credit check for BNPL?
Either a hard or soft credit check will be performed when you first sign up to get an overall view of your finances. These checks permit lenders to determine whether you can afford the repayments for the sum you wish to borrow as well as whether if you have responsibly used credit in the past.
The lender will provide you with a credit limit consistent with your affordability once you have successfully passed the credit check. Credit subject to status.
Will buy now pay later affect my credit score?
Your credit score will not be negatively impacted, if you make your repayments on a timely basis and in full. In fact, it and could help you to improve your credit score. On the other hand, failure to maintain your repayments could cost you additional fees and negatively impact your credit and your chance to borrow in the future.
What happens if I cannot afford my repayments?
The lender will take your payments from the card with which you signed up when you made your credit agreement. In the case providers unsuccessfully try to take the payment, typically most will try again after 24 hours for a couple of days. In case they are still not able to make the payment, depending on your credit card provider or scheme, defaulting fees and a report will be issued on an entry on your credit report.
If you think that you may not be able to make a repayment in advance, if you have been affected by the recent coronavirus pandemic or due to a change in your financial circumstances, contact the services department of your provider soonest possible. You may be eligible for an interest holiday or payment freeze subject to the lenders terms and conditions.
Can I use a buy now pay later app if I have an IVA, protected trust deed or other debt management plan?
Possibly, but not in all cases. Some plans will stop you taking out any form of additional credit. Some may allow you to take credit up to a small limit. Others may require you to get authorisation from your personal insolvency practitioner.
What are the alternatives to buy now pay later?
It’s important to realise that buy now pay later may only be intended as short term debt, but its still debt. Whilst you may not pay any interest if you pay the item off in the required time limit, there may be additional costs if you don’t.
To avoid any interest payments at all, saving for the item before buying it will always be the safest route.
Alternatively, you could:
- Buy second hand to cut the cost
- Use your overdraft or credit card to pay for the item, but check the interest rate first
- Choose a loan from a credit union, which may be cheaper than other alternatives
- Use a personal loan. Although loans will not usually be available for amounts lower than £1,000, you may be able to consolidate several loans into one larger amount