The Pros and Cons of Buy Now, Pay Later Programs

Buy now, pay later programs have gained popularity in recent years, especially in the realm of online shopping. These services allow consumers to break up large purchases into affordable installment payments. However, like any financing option, BNPL programs have advantages and disadvantages. Below is a guide to the pros and cons of buy now, pay later programs. Keep reading to learn whether this payment method is right for you.

What are buy now, pay later programs?

Buy now, pay later (BNPL) services are a type of short-term financing that allows borrowers to pay for their purchases over time rather than paying for them all at once. Essentially, these services offer point-of-sale installment loans, which can give the borrower more flexibility by allowing them to pay for their purchase over a series of smaller installment payments.
Increasingly, many retailers are offering buy now, pay later programs as an alternative payment option at checkout, particularly with online shopping. To do so, they’re partnering with lenders like Affirm and Afterpay, who are willing to approve borrowers for these loans as part of the checkout process.

How do buy now, pay later programs work?

To start, it’s important to note that every BNPL lender will have its own repayment terms, so there’s no one-size-fits-all definition for what you can expect if you decide to use one of these programs. However, here is an overview of how a point-of-sale installment loan might work:
  • You make a purchase and choose the buy now, pay later option at checkout.
  • A decision is made on your loan application in just a few seconds and approval is usually based on a credit check.
  • You make a small down payment on your purchase, which is usually a percentage of the sale price.
  • You pay off the rest of the purchase over a series of smaller installment payments.
BNPL services are similar in structure to a personal loan. Here, you’re told what you need to pay upfront and your payment stays the same over all of the installments. However, there are some clear benefits. For one, BNPL services typically offer interest-free loans and don’t charge the borrower any upfront fees.

How much do buy now, pay later programs cost?

According to Nasdaq, BNPL services have somewhat of a unique business model. Rather than charging interest and fees to the consumer, lenders are passing their costs along to the retailers. They typically charge the retailer a fee each time a consumer chooses to use a buy now, pay later rather than a debit card or credit card.
With that said, borrowers can incur some costs with these loans. For one thing, BNPL providers are notorious for charging exorbitant late fees. For another, most loans are only interest-free for a set period. If you miss payments or otherwise take longer to pay off your loan, you could face significant interest charges.
Given that, it’s extremely important to read the fine print on any BNPL service before you agree to allow then to help you finance a large purchase. Otherwise, you may end up paying significantly more than you bargained for in the beginning.

Who are BNPL programs best for?

Those with enough money to make their payments: As far as financing options go, BNPL services can be extremely affordable, provided that you consistently make your monthly payments or biweekly payments on time.
  • Those with a bank account or debit card: Most BNPL services will take payment by automatically withdrawing the payment amount from a connected bank account.
  • Those with decent credit: While some lenders use a soft credit check to approve borrowers for their loans, others will use a hard pull. The latter method will ding your credit score by a few points.

Who shouldn’t use BNPL programs?

  • Those who cannot afford an extra payment: As we said above, missed payments can result in expensive late fees from your BNPL provider. They can also appear on your credit report, which can damage your credit score.
  • Those without a bank account: If you don’t have a bank account that you can link up to your BNPL provider, you may be better served by other financing options.
  • Those with poor credit: Since approval for a point-of-sale installment loan is often based on a credit check, you could be denied if you have a poor credit score.

What are the pros and cons of buy now, pay later programs?

Who are some of the best BNPL providers?

Now that you have a better idea of whether or not using BNPL programs could be a good financial option for you, the next step is to take a look at a few of the best BNPL providers. In light of that, we’ve taken a look at four of the major industry players below:
BNPL ProviderPayment ScheduleSoft Credit Check
KlarnaBiweekly, monthly, 6-36 monthsNo
Affirm3, 6, or 12 monthsYes


In total, Klarna offers borrowers three different payment options. Its pay-in-four program is the classic model, which spits your total up into four equal, interest-free payments. Meanwhile, its pay-in-30-days model gives you time to try out everything you buy. You only make a payment after 30 days on any items that you decide to keep. Finally, its 6- to-36-month financing is meant to make larger purchases easier to handle.


Paypal’s new “Pay in 4” program allows you to split a big purchase into four easy payments. With this model, you make a small down payment at check out and then make a follow-up payment once every 2 weeks until your purchase is paid off in full. Best of all, as long as you make your payments on time, they’ll be interest-free.


Like its competitors, Quadpay allows you to break your purchases up into four smaller segments. In this case, consumers are allowed to pay off their purchases over six weeks. Notably, Quadpay does not perform a hard credit check, but they do charge a $1 convenience fee on every purchase.


Unlike some of the other BNPL providers on this list, Affirm is meant to be used to finance large purchases. Its loan ceiling of $17,500 is much higher than other programs. In addition, rather than having you pay off your purchase in just a few weeks, Affirm offers 3-month, 6-month, and 12-month loan terms.


Lastly, Afterpay allows you to split up large purchases into installment payments over 6 weeks. This BNPL provider takes extra steps to help you stay on track financially by giving consumers spending limits, which increase as they build up their history of making on-time payments and by capping their late fees at 25% of a transaction’s purchase price.


Is buy now, pay later the same thing as layaway?
Not entirely. Although both BNPL services and layaway involve making installment payments on an item, the process is a bit different. With layaway, you won’t receive your purchase until you’ve paid for it in full. With BNPL programs, your order will be processed as soon as you make your initial down payment.
How are BNPL programs different from paying on a credit card?
With a credit card, you’ll be charged the full amount for the item, whereas with BNPL programs, you’ll be charged in installments, Plus, as long as you make your installment payments on time, you likely won’t be charged any interest. In contrast, credit card interest charges can be high, which increases your chances of going into credit card debt.
What happens if I can’t pay off my installments?
If you can’t pay off your installments, you’ll be charged a late fee and, eventually, your account will be sent to collections. Unfortunately, having an account go into collections will show up on your credit report and affect your credit score.

The bottom line

For some shoppers, buy now, pay later providers can offer flexible financing options that can make large purchases more affordable. However, they may not be right for every buyer. If you’re thinking of going this route, it’s a good idea to read your BNPL provider’s terms and conditions before agreeing to the credit check. By doing so, can make sure that you’re aware of any potential late fees before getting started and reduce your chances of going into debt.

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