An In-Depth Look At Buy Now Pay Later Programs

  • Centennial Funding

  • 06/30/2022

  • Financial Literacy

buy now pay later placards

Buy Now Pay Later (BNPL) refers to a collection of financial services that allow you to pay for online purchases in installments.

BNPL is similar to other forms of revolving credit such as store credit cards, but with two significant differences: There’s no interest charged on the balance, and customers typically have set dates each month when they must make payments.

How Buy Now Pay Later Works

Buy Now Pay Later is a service that allows you to buy something now and pay for it later. That may sound like the same thing as buying on credit, but the difference is that with Buy Now Pay Later Service, you don’t have to apply for any sort of loan or credit card—you just use a new type of card that’s linked to your existing bank account.

In other words, buy now and pay later is another form of credit. It acts similarly to a regular loan in that it allows you to purchase something without paying for it immediately; however, unlike traditional loans (which also include student loans), this type of financing doesn’t require collateral or interest payments until after the item has been paid off completely—and most importantly, there are no pre-set due dates!

Is Buy Now Pay Later Good?

BNPL wording in wood

Buy Now Pay Later is a very convenient way to buy the things you want, but it comes with some disadvantages.

Advantages Of Buy Now Pay Later

A major advantage of Buy Now Pay Later is that you don’t have to pay for your purchases until much later. This makes it easy to buy things that are out of reach right now, such as expensive electronics or furniture.

Disadvantages Of Buy Now Pay Later

Buy Now Pay Later can be expensive if you don’t pay off your balance in full when it’s due. You’ll be charged interest on the amount you owe, which can add up quickly if you’re not careful.

And if you don’t pay off your balance by the end of your payment plan, you’ll be hit with additional fees and penalties of buy now pay later interest.

How Does Buy Now, Pay Later Work?

man using his phone for BNPL app

If you’re interested in buying something but aren’t quite sure if you can afford it, buy now pay later might be the right option for you. In this section, we’ll explore how it works and what its benefits are.

Deferred payments

This is where deferred payment comes in. If a seller offers deferred payment, they will allow customers to purchase goods or services on credit with no immediate obligation to pay for them until a predetermined date (usually within 30 days).

The buyer gets the item immediately without having to wait for their next paycheck.


While buy now pay later services aren’t technically layaway programs—the difference being that with layaway programs there’s no interest charged on your purchases—they do share some similarities with them when it comes down to how they work.

Like many layaway plans, both offer consumers a way of purchasing products through limited credit terms that won’t result in interest charges until after an item has been purchased entirely (meaning “all” payments have been made).

Is Buying Now and Paying Later Influencing My Credit Score?

Buy now, pay later can affect your credit score by increasing your credit utilization ratio.

This means that the amount of money you owe is compared to how much you have on deposit (your available balance).

Credit card companies use this ratio to predict whether or not you’re likely to default on payments.

Thus, if you are making large purchases with a buy now pay later plan and don’t have much in savings or investments, it may appear as though you are using all of your available funds and could potentially be at risk of defaulting on payments.

What Companies Let You Buy Now, Pay Later?

Here are a few companies that provide Buy Now, Pay Later options.

PayPal Credit / Bill Me Later

Paypal BNPL app

Because you may use PayPal’s credit service anywhere that takes PayPal, most major online businesses accept this BNPL.

This is a revolving credit line, similar to a credit card, that you can use again and over.


Afterpay Mobile app

Afterpay allows you to spread out your payments over three or four months, interest-free.

When you pay using Afterpay, you’ll see the payment arrangement, which normally comprises a one-time deposit followed by two-weekly installments.

Even if you don’t make your payments on time, you won’t be charged any interest with this BNPL app.

If you skip a payment, you may be charged late fees, which can harm your credit. If you don’t pay, Afterpay might charge your connected card the full amount outstanding.


Affirm Mobile App

Affirm provides personal loans with a speedy decision to fund internet purchases.

Payment arrangements vary, but Affirm’s examples spread payments out over six, twelve, or eighteen months and incur a 15 percent APR.


Klarna mobile app

Klarna divides the cost of your purchase into four interest-free installments, which are paid every two weeks. At checkout, you’ll be charged for the first installment.

This program works in the same way that Afterpay does. You will not be charged any fees or interest as long as you stick to the payment schedule.

You may be charged a late fee and maybe a returned payment fee if you miss a payment or don’t have enough cash in your connected account.

If you miss a payment, Klarna might automatically charge the full amount to your card and terminate your account. Your credit may be harmed as a result of this.

The Drawbacks of Buy Now, Pay Later

Unfortunately, because of the nature of these plans and their complexity, they can be difficult for consumers to understand and navigate.

This makes them an easy target for scammers who want access to your personal information or want to confuse you into making a decision that’s not in your best interests.

If something goes wrong with your purchase—say a product arrives damaged or defective—it might be hard for you to get out of your contract with buy now pay later providers before it’s too late.

And if there’s nothing wrong with the item itself but rather some issue with how it was sold (like fraud), then even if this is rectified by everyone involved there will still likely be consequences from both parties’ perspectives regarding what happened during that transaction period between when money was paid upfront versus payment via installments over time.

Thoroughly Assess Your Situation

The buy now pay later model is a flexible and affordable way to shop, but it’s important to remember that you should only spend what you can afford. If you can’t afford the item today then further assess your decisions. There are always other options.

If you’re having trouble with your consolidated debt on BNPL, you might want to look into a debt management or consolidation program. Our team at Centennial Funding is here to help, starting with a free consultation.

Ask us any questions you have, and we’ll identify the best options for you.

Centennial Funding

Centennial Funding

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