Convenient payment option or a debt trap?

Buy now, pay later (BNPL) options are becoming ubiquitous. You can opt for a payment plan when buying a big-ticket item like concert tickets. In fact, more than half of Coachella attendees chose that option in 2025.

Buy now, pay later is popping up for smaller purchases, too. DoorDash is partnering up with Klarna, one of the big names in buy now, pay later, for takeout orders.

Buy now, pay later options have sparked criticism for encouraging overspending. On the other hand, there are arguments that these payment plans can be used responsibly.

What do you need to know before you click the “buy now, pay later” button on your next purchase?

How Buy Now, Pay Later Works

The buy now, pay later option is a type of short-term loan that consumers can use for purchases typically between $50 and $1,000. Retailers and other companies partner with fintech companies like Affirm, Klarna, PayPal, and Sezzle to offer these loans.

You will make an initial payment of approximately 25% of the total purchase price when opting for a buy now, pay later loan. Then, you will pay the remaining amount that you owe in a series of installments. These loans are often advertised as interest-free.

The Benefits and Downsides

Buy now, pay later loans offer consumers the convenience of making a purchase if they do not have the necessary cash available. Splitting the payments up into interest-free installments can be more affordable than putting the purchase onto a credit credit, where interest could accrue.

But these loans are not without risk. These loans may come with unexpected interest. Even on buy now, pay later loans that are interest-free for the initial repayment period, you could run into significant interest rates, as high as 36.99%, and late fees if you do not repay the loan on time.

These loans also have the potential to impact your credit score. Some lenders will perform a hard credit check, potentially lowering your score. If you are late repaying the loan, the lender will likely report that to the credit bureaus. Plus, these loans do not offer the same protections as a credit card.

Should You Buy Now, Pay Later?

Buy now, pay later options can be very convenient, but it is important to protect yourself from the potential risks.

• Consider if you can make the purchase outright.
• Check the buy now, pay later terms and conditions to make sure there aren’t any unexpected costs.
• Ensure you can pay the loan back on time.
• Think about signing up for automatic payments so you don’t accidentally incur any late fees or interest.
• Weigh the pros and cons of using a credit card to finance the purchase.
• Avoid the temptation of using BNPL for routine or recurring purchases.

The Bottom Line

Nearly a third of Americans have used a buy now, pay later loan. But half of those users have run into issues, such as overspending, missed payments, and purchase regret.

Buy now, pay later could be a convenient, affordable option for financing a purchase if you carefully evaluate the loan offer and are prepared to repay it on time. Know the risks to avoid an expensive loan that could hurt your credit score.