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Buying something and not paying for it straight away is almost like getting it for free, right? Maybe for the first month, but not when the payment is due. Buy Now, Pay Later is a loan and it’s always important to remember that.
BNPL is a payment plan that allows you to either spread the cost of purchases over three payments or buy something and pay within 30 days. It can be particularly tempting when you’re waiting for payday – want that new game, dress, pair of shoes but payday is two weeks away? No problem with Buy Now, Pay Later.
In simple terms, the Buy Now Pay Later provider pays for the product or products that you want. Then you pay back the provider either in installments or in one sum before the 30 days are up. Each Buy Now Pay Later option works differently, so you should always read the terms and conditions closely.Help Managing Buy Now Pay Later Debts
More and more companies are offering BNPL – you could call it the new trend in credit. One of the main reasons it is so popular is because it doesn’t feel like borrowing money. The short time frame and the fact that it’s so accessible means it’s available to almost anyone and with just a couple of clicks of a button. Another perk is that they offer repayments interest-free but be careful, because if you’re late with payments then they may start charging interest, and it could be very high!
It’s become the norm to see BNPL options on big websites like ASOS, Pandora, M.A.C, Wayfair, Shein – the list goes on and on. However, these big brands don’t offer a credit scheme themselves.
The BNPL payment option currently is only available through a third party such as PayPal, Clearpay, Laybuy, and Klarna – and there are more and more BNPL companies popping up as the trend takes off! You need to make an account with one of these companies then select that payment method when shopping online. No, not everyone offers this yet but it’s a growing market and soon could be an option on most websites. Global Banking Finance reported that there was a 39% increase in BNPL payments in the UK in 2019, and they expect that to double by 2023.
The first thing to note is that they’re not going to give you a hard credit check to sign up to a BNPL company. But that doesn’t mean they can’t affect your credit score. If you make late payments or miss them entirely, that’s when things get serious. Remember, BNPL still counts as taking out credit – which is a loan. If you’re worried about your credit score, check out our budgeting tricks to improve your credit rating.
It was announced in October 2021 that BNPL will come under regulation by the Financial Conduct Authority (FCA). Before this, Buy Now, Pay Later was unregulated and posed more risks than other forms of credit. Although this is good news for the consumer, The Guardian reported that the government has still said that there is “relatively little evidence” for what the widespread consumer harm could be. As it’s a brand-new service, it’s hard to know what will happen. So, we’d always advice using caution and not putting large sums of money down on a BNPL scheme.
When answering the question is Buy Now Pay Later is a good idea for you, you should always realistically consider your financial situation. Will next month really be a better time to pay? Will you be able to afford to make the payments? And will you meet the repayment dates?
If the product is out of your price range and the only means of ever purchasing it would be through BNPL, then maybe this payment method isn’t for you. Consider putting money aside each month and buying the product outright – it will take longer but it could stop you from getting into unnecessary debt.
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