What is ‘Buy Now, Pay Later’?
Buy Now, Pay Later is a type of loan consumers can use to immediately acquire an item, with a small down payment or deposit. The remaining balance on the item is then paid in a series of installments over time.
These types of payment plan solutions have seen a recent increase in popularity thanks to larger companies like Affirm, Sezzle, and even PayPal being widely used by ecommerce businesses as an additional means to generate sales.
Payments are typically made weekly, bi-weekly, or monthly, and are typically used to purchase high value goods. So, what’s the problem? It sounds simple enough, and you get the product immediately, however, it’s easy to forget that while you just scored a hot ticket item, you’ve also just put yourself in debt for it.
Read our list of pros and cons below to help you decide whether Buy Now, Pay Later is the right move for your budget.
Pros of Buy Now, Pay Later
- There is typically no minimum credit score required.
- Accessing a BNPL plan is easier than qualifying for a credit card.
- These offer you the potential to afford larger purchases.
- BNPL plans are widely available as they have been quickly adapted by retailers.
Cons of Buy Now, Pay Later
- If forgotten about, you could be charged hefty late fees for missed BNPL payments.
- It becomes easier to overspend. Plus, BNPL opportunities can lead to more frequent and risky impulse purchases.
- These can have a negative affect on your credit score in the long run, as missed Buy Now, Pay Later payments can be reported to credit bureaus.
- If you’re not satisfied with the product, receiving a refund can be more difficult as you often need to communicate with both the retailer and the BNPL provider.
Think Before You Buy
Before using a Buy Now, Pay Later plan to finance a larger purchase, or any purchase at all, consider asking yourself the following, “Is this something I need, or just really want? Will a weekly payment work fit within my budget, or should I choose a monthly payment plan?
After weighing the pros and cons of your purchasing decision, think about setting up automatic payments to ensure you don’t miss a payment, and in turn risk your credit.
