What You Need to Know About Buy Now, Pay Later Funding Options

These days, consumers are more and more familiar with loans and one of the most common ways that people take out personal loans are Buy Now, Pay Later payment options. These are offered regularly at checkout for online retailers and some businesses even offer in-store application for these loan types. If you’ve ever seen this option and are wondering if Buy Now, Pay Later payment plans are a good idea, this article covers some of the basics to help you make an informed decision.

How do Buy Now, Pay Later loan options work?

Buy Now, Pay Later plans are exactly what they sound like – they offer customers an option to divide their total payment into several parts which allows a large purchase to be more manageable. The most common option that these lenders offer is a Pay-in-4 option where you pay 25% of the total amount when you check out and you make the remaining three payments every two weeks from that point on until the total amount has been paid. Most Pay-in-4 plans don’t require any fees, interest, or hard credit checks. 

Some lenders, like Affirm or Klarna, may offer multiple payment plans to you if you qualify. These additional payment plans might require a hard credit check or interest but in exchange your payment schedule might be longer and require lower payment amounts on each due date. For a significantly large purchase like airplane tickets, furniture, or a new computer, this can be just as smart as applying for a store credit card or any kind of credit card that is designed to give you extra perks such as airline credit cards. In any case, these loans can be your best payment plan option even with the interest rates they might offer. 

What kind of Buy Now, Pay Later providers are out there and what are the benefits to each?

There are many companies that offer Buy Now, Pay Later and if you do any amount of online shopping you have probably seen many of them listed. The providers listed below are the most popular options.


Klarna is a Swedish company that has been around since 2005. In the last few years they have become more prominent in the United States and they even offer an app where you can browse every store that offers Klarna as an option and manage your payment plans. They work with most major retailers and even offer some deals that are exclusive to Klarna customers. If you miss a payment date you are offered a grace period of a few days before any consequences kick in but in most cases the consequence will be that your payment plan is essentially canceled and you will be required to pay the remaining amount fully.


Affirm is fast becoming one of the most popular providers of these types of loans and one of the big perks is the ability to use your Affirm loan for a wide variety of retailers, even the ones not mentioned in the app. The only caveat is that you cannot use Affirm to pay for things like weapons and drugs, including legal substances like CBD. Affirm offers Pay-in-4 plans as well as other loans that you can pay back in a time frame as long as a year. With the majority of Affirm plans that require interest, you can often save money by paying off your balance early.


Afterpay is an Australian company, founded in 2014, that functions very similarly to Klarna. You can use Afterpay in person as well as online and Afterpay may offer hardship assistance alternative payment plans if you find yourself in a financial struggle during your repayment term.

Paypal Pay in Four

Paypal Pay in Four is exactly what it sounds like – an option that Paypal offers that allows you to break the total payment amount into four. You can apply for it at almost any online retailer where Paypal is accepted which often makes it a more easily accessible option than other lenders.

Are Buy Now, Pay Later loan plans a good idea?

As with most loan types, whether or not Buy Now, Pay Later loan options are a good idea depends entirely on the individual who is applying and their financial habits and history. If you know you’ll be able to make the payments comfortably, then there’s no obvious issue when it comes to applying for a new loan. Usually these providers will run a soft credit check before offering you a loan so you will also want to make sure that your credit score is at a good place.

While it’s generally a better idea to pay up front if you can, sometimes a payment plan might be a more comfortable option for you. Usually these types of loans do not require any kind of interest or fees as long as you don’t miss a payment so there’s no harm in utilizing this kind of service. 

If you are presented with a payment plan of some kind when you are shopping online, you may want to consider waiting for at least 24 hours before you actually click “Accept”. This allows you to judge whether or not you really need it because the payment plan option might lead you to spend more than you technically should.

Payment plans for regular purchases are becoming increasingly common and look like they are here to stay. If you shop online you’re almost guaranteed to be offered one and as long as you are able to stay on top of your payments and make them on time, there are no severe drawbacks to taking advantage of this option. Just make sure you are fully aware of the full amount of the loan and are able to manage it responsibly.

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