A buy now, pay later (or BNPL) loan is a type of short-term financing that enables shoppers to pay their invoice incrementally over a number of weeks and even months, slightly than abruptly.
Unlike bank cards, BNPL plans sometimes do not cost curiosity. And suppliers do not run a tough credit score examine, so the loans are notably engaging in case you have bad credit report or no credit score historical past.
According to a 2025 Lending Tree survey, practically half of Americans have used a BNPL service like Klarna or Affirm and near 1 / 4 (23%) have had three or extra energetic BNPL loans at one time.
First launched in 2019, the BNPL phenomenon has grown from standalone suppliers to retailers like Walmart and Apple, and even on-line giants like Amazon and DoorDash.
An estimated 91.5 million Americans will use BNPL in 2025.
Klarna
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Interest charges
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Credit restrict
No predefined spending restrict
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Loan phrases
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Fees
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Available retailers
Accepted at greater than 450,000 retailers, together with Amazon, Walmart and Target.
Affirm
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Interest charges
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Loan phrases
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Fees
There aren’t any late charges, however making late funds can have an effect on your means to get a mortgage sooner or later and probably your credit score rating.
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Return coverage
Customers are solely refunded the principal amount, so if you do not have a 0% mortgage, you will not be refunded for the curiosity you paid earlier than making the return.
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Available retailers
Affirm has greater than 245,000 retailers, together with Amazon, Peloton, Adidas and Target.
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Loan quantities
Up to $25,000 on a purchase order.
What is purchase now, pay later?
BNPL is a type of short-term installment mortgage that lets you full the gross sales transaction and obtain the products or companies whereas breaking down fee into a number of smaller increments. The first fee is due at checkout, adopted by common installments till the stability is paid off.
Most BNPL companies provide “pay-in-four” installment plans, which set funds two to 4 weeks aside, matching many individuals’s pay durations.
How does purchase now, pay later work?
At checkout, you may even see the choice to pay in installments. If you choose it, you may be directed to fill out an utility with private particulars like your identify, contact data, Social Security quantity and chosen fee technique.
The BNPL supplier conducts a soft credit check that will not damage your credit score rating and, in the event you’re accredited, will current you with a fee plan.
If you employ a pay-in-four BNPL plan to buy an $800 iPhone, for instance, you’ll pay $200 at checkout. You’d then make $200 funds each two weeks till the telephone was paid for in six weeks.
The pay-in-four plan would not often embrace curiosity, however BNPL plans with longer compensation phrases can cost annual proportion charges as excessive as 36%.
You may be hit with late or rescheduling charges, which may be $10 or extra relying in your supplier.
Does purchase now, pay later have an effect on your credit score rating?
While conventional types of financing, like bank cards and private loans, seem in your credit score reviews and are factored into your credit score rating, the image for BNPL is less clear.
FICO mentioned it will start together with BNPL info in credit score scores in fall 2025, however high suppliers like Klarna and Afterpay say they will not ship knowledge to the credit bureaus for consideration.
Afterpay
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Interest charges
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Loan phrases
Afterpay solely presents 1 mortgage choice: Customers could make 4 installment funds over 6 weeks. You should make one down fee (sometimes 25% of the order), after which a fee as soon as each two weeks.
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Fees
Afterpay does cost late charges: $8 or 25% of the transaction, whichever is much less.
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Return coverage
In order to return objects, you may should undergo the service provider first. Since you do not pay curiosity in your Afterpay mortgage, you do not have to fret about not being refunded for curiosity. Afterpay additionally presents partial refunds on orders. However, you’ll nonetheless be on the hook for funds till the service provider has accepted and processed the return.
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Available retailers
Approximately 100,000 retailers globally. Consumers may also use the Afterpay Card to pay for purchases in retailer. However, that is solely accessible for some clients to make use of at choose retailers similar to Amazon, CVS, Target, Nordstrom and Macy’s.
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Loan quantity
The quantity of credit score you may entry is dependent upon how lengthy you’ve got been an Afterpay buyer and on whether or not you are making your funds on time and in full. A brand new person will have the ability to spend lower than somebody with an extended historical past. The extra you employ Afterpay, the extra you may spend with it.
Affirm has been sending its mortgage knowledge to Experian, Equifax and TransUnion and is working with FICO to develop credit score rating fashions that embrace its BNPL knowledge. But it is not clear if banks and different lenders would use that mannequin when assessing a buyer’s creditworthiness.
However it pans out, paying your BNPL installments on time and in full will shield your credit score rating. In addition, attempt to solely take out one BNPL mortgage at a time.
Is purchase now, pay later a good suggestion?
BNPL is usually a useful approach to break bigger funds into extra manageable increments with out the danger of being hit with monumental rates of interest.
But that very same comfort could make them a dangerous proposition in the event you’re not assured you can also make well timed funds. BNPL loans can cloud your thought of your price range, or tempt you to take out a number of short-term loans without delay.
Read on: The best buy now, pay later apps
Lending Tree discovered that 23% of BNPL customers had three or extra loans energetic at one time and 41% paid considered one of their BNPL payments late.
In addition, returning objects purchased by way of BNPL may be tough, so be sure to’re sure about your purchases.
Pros and cons of purchase now, pay later
There are benefits and disadvantages to think about earlier than utilizing BNPL.
Pros
- Smaller funds which are usually interest-free
- Quick approval course of
- Don’t want a excessive credit score rating for approval
Cons
- Can encourage reckless spending
- May be hit with late charges
- Returns and refunds may be sophisticated
- May harm your credit score rating
Buy now, pay later FAQs
What is purchase now, pay later?
Buy Now, Pay Later (BNPL) is a short-term mortgage that permits you to break a invoice into smaller installments as an alternative of paying in full. It’s sometimes cut up into 4 funds paid over six weeks, with the primary fee due at checkout.
Does purchase now, pay later have an effect on my credit score?
It could. FICO will begin together with embrace BNPL in credit score scores in late 2025. But a number of BNPL firms say they will not be sending mortgage knowledge to the foremost credit score bureaus for consideration.
Do I’ve to make a down fee with a BNPL mortgage?
Yes, if you select to take out a BNPL mortgage, your first fee will probably be due at checkout.
How do purchase now, pay later firms become profitable?
BNPL suppliers primarily become profitable off of charges from retailers. Stores and websites that settle for BNPL should pay a payment for every transaction. In addition, some BNPL cost late charges and a few longer-term loans could have curiosity expenses.
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