Buy Now Pay Later. Payments & Debt Advice. StepChange

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.

Newer BNPL (also known as shop now pay later) providers like Klarna, Clearpay, Paypal, Laybuy and Amazon allow you to shop online without the need to pay straight away.

Buy now, pay later is a convenient way to borrow money, but it’s important to keep track of your spending.

Because it’s such a quick and easy way to pay for goods, there’s the risk of borrowing more than you can afford to pay back. This could make your financial situation worse. It can also be easy to overestimate what you can afford and that may make your financial situation worse. If you’re struggling with money, find out how we can help you.

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, 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.

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Is a short term loan right for you?

Buy now pay later, payday loans and doorstep loans can be convenient, if you need money fast. These types of loan are an expensive way of borrowing and can leave you worse off financially. You should make sure you can afford to repay the full amount – including the interest. You also need to think about what might happen if you fall behind with payments.

Relying on short term, high interest credit to pay for essentials is a sign that you might need help. If you’re struggling with money, find out how we can help you.

There are cheaper ways of borrowing, including arranged overdrafts and credit unions. If you're on a low income and need emergency help with money, you may be able to get support from a trust fund or your local council.

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 .

Does buy now, pay later affect your credit score?

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 history.

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

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.

Debt management plan (DMP) or token payment plan (TPP)

If you’re on a debt management plan or a token payment plan, 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.

Individual voluntary arrangement (IVA)

If you’re on an individual voluntary arrangement, 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 nearly new and refurbished appliances cheaper than 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.

I can’t afford my buy-now pay-later payment

Taking out buy-now pay-later credit can seem like a good idea at the time, but now that people’s financial situations have changed unexpectedly, many may struggle to keep up with their agreed payments.

If you can no longer afford to make your agreed payments, contact your creditor as soon as possible to find out how they can help.

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. Find out how we can help you.

Answer 5 quick questions to find out. It shouldn’t take more than a minute to get a clear picture of whether you're on top of your credit card, store card and catalogue repayments or not.

1

Did you pay only the minimum payment last month?

2

Do you regularly pay only the minimum payment?

3

Have you had any letters warning you that you're in 'persistent debt'?

4

Do you ever miss payments to your credit card, store card or catalogue accounts?

5

Do you worry about not being able to keep up with repayments or not being in control of your credit?

You're in control

Based on your answers it sounds like you’re in control of your repayments.

Because you’re not missing any payments and you’re not just paying the minimum each month, you’re reducing your balance. You’re also saving money by not paying interest.

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Things are OK

Based on your answers, it sounds as though you’re mostly keeping on top of your repayments at the moment.

That’s great. By paying more than the minimum payment each month, you reduce your credit card balance quicker and you can also save yourself money because you’ll pay less in interest.

Find out more about what can happen if you’re only making minimum payments by clicking the button below.

Find out more

You could make some improvements

Based on your answers it looks as though you’re doing everything you can to keep on top of your repayments, but you might be able to make improvements.

If you depend on making the minimum payment each month, you’re at risk of your account being in ‘persistent debt’. Your creditors will contact you and ask you to pay more each month.

Find out more

Or you can contact our dedicated persistent debt team on 0300 303 2517. We’re available Monday to Friday 9am to 5pm.

And if you’ve missed any payments, you might be struggling to keep on top of your finances. Find out how we can help you.

You need debt help

Based on your answers, it looks like you’re struggling financially. We can help you out. We’d recommend you get in touch with us for free debt advice.

Use our online debt advice tool for tailored budgeting advice and a personal action plan.

Get debt help now

If you’d like to talk to a debt advisor, please call us on 0800 138 1111. We’re open Mon-Fri, 8am-8pm, Sat 8am-4pm.

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