What is buy now, pay later?

Buy now, pay later (BNPL) is the name for a kind of credit payment that allows you to purchase goods, but pay for them either later or by instalments. However, newer buy now, pay later providers such as Klarna, Clearpay, Paypal, Laybuy and Amazon enable customers to shop online without having to pay straight away.

Shops and catalogues have offered their customers the option of putting off payment since long before the arrival of internet shopping.

The new online providers let their customers ‘spread the cost’ of shopping online. You can either

• pay later, which means delaying payment for a purchase for between 14 and 30 days, or
• ‘slice’ the payment into smaller chunks that can be repaid over several months.

It’s really important to recognise that you should treat BNPL like any other debt, and never borrow more than you can afford. If you're on a debt solution, using BNPL is likely to be against the guidelines. If you can’t pay what you owe on BNPL, contact us for free, impartial debt advice.

What makes ‘buy now pay later’ popular?

The flexibility of BNPL payment options means not having to wait until you have the money in your bank account before shopping. For people looking for the best bargains and deals that are only available during a limited timeframe this can be handy. BNPL is also convenient for online clothes shoppers, as it lets you ‘try before you buy’. This means you order clothes or shoes, and then if you don’t want them, you can return them before the first payment is taken.

BNPL providers are popular with online retailers because they make it less likely you’ll abandon your shopping basket. However, cancelling your purchase is exactly what you should do if you can’t afford to buy.

Need help with buy now, pay later debt?

Lease or hire agreements

It can be difficult to keep track of BNPL purchases, making it more challenging to keep to a budget. It’s important to keep a record of:

• How much you paid
• How much you ‘sliced’
• When the payment dates are

What happens with payments on buy now, pay later?

When you’re making BNPL purchases, it’s not easy to keep track of when you need to make payments, especially if you’ve chosen to ‘slice’ the payment over several months.

If you’re late paying for your BNPL purchases, interest and charges can mount up. If you can’t pay what you owe, BNPL lenders can use the same debt collection methods as other lenders of unsecured debt.

Buy now pay later debts are covered by the Consumer Credit Act .

I’m on a debt solution. Can I use buy now, pay later?

When you’re on a debt solution, it’s usually against the guidelines to take out additional credit while paying off the debts that you already have. As BNPL is a type of credit, you shouldn’t use this while you’re in a debt solution.

If you’re on a debt management plan (DMP) or a token payment plan (TPP), and you’re considering using BNPL, please get in touch with your plan provider. They’ll need to understand what you need the credit for, and what alternative options are available.

If you’re on an individual voluntary arrangement (IVA), you must speak with your IVA provider before taking out any form of credit, including BNPL. Taking it out before getting consent off your Insolvency Practitioner would be considered a breach of your IVA, which could cause it to fail.

There’s usually a section in your budget for sundries and emergencies. In this section, you can set money aside each month to cover household appliances, should you need to replace one in an emergency. There are also several UK charities that sell near new and refurbished appliances for much cheaper than what you’d find on the high street.

Your plan provider knows that you have expenses such as Christmas and birthdays to cover each year. Depending on your situation, they’ll do their best to help you prepare for these expenses in advance. Using a realistic budget, reviewing it regularly and looking for ways to save money and increase your income can really help.

Buy now, pay later and your credit file

It’s important to be aware that like any financial service, using BNPL can affect your credit score. Certain BNPL lenders make a ‘hard’ credit check every time you spread payments over a long period.

These checks will appear on your record and a large number of hard credit checks can affect your credit score.

Failing to make a payment on time will also have a negative impact on your credit score.

Think first before you buy now, pay later

When you’re shopping online, it’s a good idea to ask yourself these questions before you make a purchase using BNPL:

• Is the money needed for the purchase within your weekly (or monthly) budget?
• If BNPL was not available, would you still make the purchase?
• Is what you’re buying a necessity?
• Can you wait for the item until you next have some money to spend?

It's also worth thinking about how you can save the money in advance to avoid using buy now, pay later. You might consider:

• Budgeting an amount each month for online shopping
• Selling unwanted items first, to raise money you can spend on purchases
• Reducing your outgoings in other areas, to save money

Buy now, pay later help and debt advice

If you’re regularly deferring payments or spending too much on buy now, pay later shopping, it may be a sign you need debt help.

Get free, expert advice about debts and managing your money. Contact us (free from all landlines and mobiles) or try our online debt advice tool.