What Is Buy Now, Pay Later?

Buy now, pay later (BNPL) apps have become increasingly popular as they offer a convenient way for consumers to finance their everyday purchases without the need for extensive applications and high interest rates. These apps allow users to buy items immediately and pay for them in installments instead of making a full upfront payment. This flexibility makes budgeting easier, as it allows consumers to spread out their payments over time while still enjoying immediate access to the desired products.

Among the BNPL apps available, Klarna stands out for its unique features. Klarna offers no-interest financing and has accessible qualification requirements, making it a flexible option for a wide range of purchases. The app is widely accepted by top retailers, giving users the convenience of using it in various places. Klarna also offers three repayment options: Pay in 4 (four interest-free payments every two weeks), Pay in 30 days, and monthly financing for up to 36 months. While the first two options have no interest or fees, the monthly financing option may charge interest rates that can exceed 20%. It’s important to note that, like other BNPL apps, Klarna can encourage consumers to overspend and potentially enter a cycle of borrowing.

For borrowers with poor or limited credit, Splitit provides a financing solution without requiring an application process or credit check. Splitit is a white-label BNPL app that simplifies financing for online retailers. Instead of creating a new loan, Splitit allows consumers to split their purchases over two to 24 payments using their existing credit cards. This eliminates the need for a credit inquiry or application process. Splitit charges the first installment to the borrower’s card upon purchase authorization or shipping and then charges the card monthly until the payment plan is complete. With an average order value over $1,000, Splitit is particularly popular for larger purchases and offers a streamlined option for borrowers with less-than-stellar credit.

Affirm is another well-known BNPL app that offers high financing limits and is accepted at a wide range of retailers. Borrowing limits on Affirm range from $50 to $25,000, making it a convenient option for significant purchases. The platform provides prequalification without a hard credit check, and borrowers can choose between two payment plans: Pay in 4 or monthly payments. Pay in 4 incurs no interest or fees, and qualification doesn’t require a hard credit inquiry. While the monthly payment structure has no hidden fees, the APRs can range from 0% to 36% based on the borrower’s creditworthiness. Additionally, Affirm offers a virtual card feature through its app, increasing flexibility and streamlining the borrowing process.

PayPal Pay in 4 allows consumers to finance purchases starting at $30 up to $1,500, with the added benefit of no late fees. This option enables shoppers to split their purchases into four interest-free installments, including one down payment and subsequent bi-weekly payments. PayPal Pay in 4 has a wide selection of brands available for financing. PayPal also offers monthly payment options with six-, 12-, or 24-month plans and APRs ranging from 0% to 29.99%. The financing amounts for monthly payments are higher, ranging from $199 to $10,000. PayPal provides standard purchase protection to its customers.

For first-time BNPL shoppers, Afterpay offers several features to facilitate smart financing decisions. Afterpay is accepted by a large selection of online and in-store retailers. While an application process and soft credit check are required, there is no need for a hard credit inquiry to qualify. This simplicity makes Afterpay suitable for those using a BNPL app for the first time. Afterpay implements safeguards to prevent overspending, including notifications for missed payments. Late payments are not reported to credit bureaus. Similar to other top BNPL apps, Afterpay does not charge interest on purchases, but late fees may apply.

As BNPL apps continue to gain popularity, consumers have more options to finance their purchases conveniently. However, it’s essential for users to be mindful of their spending habits and use these apps responsibly to avoid potential financial pitfalls.