Buy now, pay later, and what it does to your budget

A buy now, pay later loan lets you buy something now with little or no payment up front and pay off the balance in four or fewer payments. You'll usually see the option at online or in-app checkouts, though some stores offer it too. Most of these loans don't need a hard credit inquiry.

How the payments work

One common plan splits the cost into four interest-free payments, two weeks apart. The first payment may be due at checkout or two weeks later. Unlike a credit card, each new BNPL purchase may come with its own check of your creditworthiness.

To apply, you give your name, email address, mobile number and date of birth. You generally have to be at least 18, have a mobile phone number, and have a debit card, credit card or bank account to make the payments.

When a payment is late

Many BNPL loans don't charge interest, but most charge late fees if you don't pay on time. Each lender has its own fees and policies, so read each loan's terms. A missed payment may also lead the lender to freeze the account so you can't make more purchases, and an unpaid debt may go to a collector.

Automatic payments

You can sign up to repay automatically from a debit card or bank account. If the account doesn't have enough to cover a payment when it comes out, your bank may charge an overdraft or non-sufficient funds fee.

Several loans at once

Each BNPL loan has its own schedule. Several loans in repayment at the same time means several sets of dates and amounts to track.

Credit reports

Your BNPL payment history may not be reported to credit reporting companies. If the lender or a debt collector does report it, missed or late payments might hurt your credit history and scores.

An annotated example

What to do next

List every BNPL loan you have, with each payment's date and amount, in the same place as your other bills. Check whether each one draws automatically from your checking account, and whether the balance will cover it on that day. Keep the payment schedule for any purchase you return until the refund appears.