Buy Now, Pay Later Alternatives
From big-ticket items to everyday purchases, buy now, pay later (BNPL) is an increasingly popular form of financing. But just because something is popular doesn’t mean it’s always a good idea.
Learn about buy now, pay later alternatives before you download that app. There’s no denying that BNPL provides instant gratification. Still, you’ll be thankful you took the time to research — even if this option ends up right for you.
What is buy now, pay later?
Buy now, pay later apps split retail purchases into equal monthly payments. But you can’t use BNPL just anywhere. The retailer you’re shopping with must partner with the app.
You can also only use BNPL apps to pay for retail goods like clothes, electronics and groceries. But there are a few exceptions. Take Zip, for example. It allows you to pay for some bills, such as your car insurance and your cell phone, but not others, such as memberships and subscriptions.
Most BNPL apps offer a few different payment plans to choose from. Here are the most popular:
- Pay in 4: With Pay in 4, you’ll make your first payment at the time of sale. Then, you’ll pay off your order in three more payments, each due every two weeks. Most of the time, you won’t pay interest on Pay in 4.
- Pay in 30: Pay in 30 is not as common. It allows you to buy without making a down payment. In 30 days, the entire balance of your order is due. Like Pay in 4, Pay in 30 generally comes interest-free.
- Monthly financing: Monthly financing works like a personal loan — because it is. You’ll typically have 12 to 48 months (or longer) to pay off your order, and payments are due once a month. Unlike the first two payment plans, most BNPL apps charge interest on monthly financing.
Pros and cons of buy now, pay later
| Pros | Cons |
|---|---|
| Usually won’t hurt your credit. Unless you’re choosing monthly financing, most BNPL apps only run a soft credit check to determine your eligibility. No interest on Pay in 4 plans. Most BNPL apps offer interest-free financing if you go with Pay in 4. Can make large purchases easier to manage. Since you won’t have to pay for your entire purchase up front, BNPL can make expensive items more accessible. Doesn’t always require a down payment. Some BNPL apps don’t ask for a down payment, even on monthly financing. | Usually won’t help you build credit. Since most BNPL apps don’t report Pay in 4 to the credit bureaus, making payments on time won’t help you build credit. Fees can add up. Many BNPL apps charge fees instead of interest. Some of these fees can get excessive. For example, some apps charge a fee for every payment you make. Could lead to overspending. Since you aren’t paying the full price of your item up front, it can be easy to get carried away with impulse purchases. Not all retailers accept BNPL. You can only use BNPL where retailers accept it as a payment option. Using BNPL in-store can also be a hassle. Normally, you have to create a digital card and then add it to Google Pay or Apple Pay. |
Buy now, pay later vs. credit card
One of the biggest benefits of BNPL is no interest on Pay in 4. If you have strong credit and qualify for a 0% APR card, interest won’t apply during your introductory period. Introductory periods typically last from six to 21 months. Also, you won’t pay interest on standard cards as long as you pay your balance in full every month.
Then there are rewards credit cards, which allow you to rack up points, cash back or airline miles with everyday purchases. Some BNPL apps offer benefits like discounts and contest entries, but these pale in comparison to what you can earn with rewards cards.
| BNPL | Credit card | |
|---|---|---|
| Annual percentage rate (APR) | Usually no interest on Pay in 4, but monthly financing can come with interest (typical maximum APRs hover around 35.99%) | Variable APRs that fluctuate with market conditions |
| Repayment terms | Six weeks, several months or a couple years, depending on the BNPL app and the payment plan | As long as you’re within your credit limit, you can continue to charge (called revolving credit) |
| Amounts | How much you can borrow depends on the app | Credit limit depends on your credit score and payment history |
| Fees | Installment fees, payment rescheduling fees and late payment fees are common | May charge late fees, annual fees and over-the-limit fees |
Buy now, pay later vs. personal loan
Personal loans are more versatile than BNPL. They come as an upfront lump sum, and loan amounts generally range from $1,000 to $50,000 (or higher). You can use a personal loan for nearly anything, including emergencies, debt consolidation and home improvement.
Like BNPL, you’ll make equal monthly installments. But because personal loans provide much more money than BNPL, their repayment terms are longer.
Longer repayment terms can be a double-edged sword. Personal loans usually come with lower interest rates than credit cards if you have excellent credit. But you could end up paying a lot of interest over time if you have bad credit.
That doesn’t mean that bad credit loans don’t exist. Just be sure to use a personal loan calculator to understand exactly what you’re getting into. Also, most personal loan lenders report to the credit bureaus. That means on-time payments can help you improve your credit.
| BNPL | Personal loans | |
|---|---|---|
| APR | Usually no interest on Pay in 4, but monthly financing can come with interest (typical maximum APRs hover around 35.99%) | Depends on your creditworthiness, but generally range from 5.99% to 35.99% (or higher) |
| Repayment terms | Six weeks, several months or a couple years, depending on the BNPL app and the payment plan | Varies by lender, but usually 12 to 60 or 84 months |
| Amounts | How much you can borrow depends on the app | Usually $1,000 to $50,000, but depends on lender |
| Fees | Installment fees, payment rescheduling fees and late payment fees are common | Origination fees (or an upfront fee the lender takes out of your loan) are common, as are late payment fees |
Buy now, pay later vs. personal line of credit
Personal lines of credit work similarly to credit cards. As long as you’re within your credit limit, you can continue to borrow. There’s one big difference, though. Most PLOCs have a draw period and a repayment period.
You can only borrow during your draw period, and you pay back what you owe during your repayment period (sometimes as a lump sum).
PLOCs are not as common as BNPL apps, credit cards or personal loans. You can find them with some banks and online lenders (like U.S. Bank), but bet on needing strong credit to qualify.
| BNPL | Personal line of credit | |
|---|---|---|
| APR | Usually no interest on Pay in 4, but monthly financing can come with interest (typical maximum APRs hover around 35.99%) | Usually variable, but often lower than credit cards if you have excellent credit |
| Repayment terms | Six weeks, several months or a couple years, depending on the BNPL app and the payment plan | Draw and repayment periods tend to run three to five years, but depends on the lender |
| Amounts | How much you can borrow depends on the app | Usually $1,000 to $50,000 |
| Fees | Installment fees, payment rescheduling fees and late payment fees are common | May be charged draw fees (or a fee every time you borrow), over-the-limit fees, annual fees and origination fees |
Is buy now, pay later right for you?
BNPL could be right for you if you need to split up larger purchases and are confident you can pay off your balance in six weeks. If you do, you’ll bypass interest on most apps (but you may pay a fee). BNPL might also be a good choice if your credit isn’t great and you don’t qualify for a 0% APR or rewards credit card.
You should skip BNPL if you have a hard time keeping your spending under control — especially if you opt for monthly financing. Some BNPL apps report late payments to the credit bureau on their monthly financing plans. Late payments could prove disastrous for your credit score.
Frequently asked questions
Almost all BNPL services only require a soft credit check for their Pay in 4 plans. That doesn’t guarantee that you’ll be approved, but generally, BNPL is easier to qualify for than many other types of financing.
It can, but it usually doesn’t. Most BNPL apps don’t run a hard credit pull or report your payments to the credit bureaus on their Pay in 4 plans. However, this isn’t always the case with monthly financing. Be sure to read terms and disclosures so you know how the app works before borrowing.