How does Buy Now Pay Later (BNPL) work
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How does buy now pay later (BNPL) work
Millions of people use Buy Now, Pay Later (BNPL) to shop both online and in-store. As a popular alternative to traditional credit cards or loans, BNPL has become a go-to financing option for those looking to make purchases without paying upfront.
In this blog, we’ll explore how BNPL works, its impact on credit scores, and the pros and cons of using this payment method.
What is buy now, pay later (BNPL)?
BNPL is a short-term loan. It allows shoppers to borrow money interest-free and is repaid in instalments over the course of a few weeks or months. This payment method is typically offered by online and in-store retailers and can also be available through credit card providers.
While BNPL is designed to make small, manageable purchases easier, it’s important to note that late repayments result in fees and, in some cases, damage to your credit score.
How does buy now, pay later work?
The way BNPL works can vary depending on the provider, but the general structure is relatively consistent. Retailers partner with BNPL companies to offer financing options at checkout. The process is as follows:
- Choosing BNPL at checkout: After selecting your items and proceeding to checkout, you’ll be given the option to pay using BNPL.
- Repayment terms: Typically, you pay a small portion (such as 25%) upfront at checkout. Then, the exact terms of repayment can differ, and some providers offer the flexibility to pay in 3, 6, or 12 instalments over the coming weeks or months.
- No interest: Many BNPL schemes are interest-free if payments are made on time. This may make it a more affordable option than using a credit card with high interest rates.
- Repaying the loan: You’ll make payments to the BNPL provider according to the agreed-upon schedule. Payments are often automated, ensuring you stay on track.
How does BNPL work regarding credit scores?
In the UK, some BNPL providers report your payment history to credit reference agencies like Experian, Equifax, or TransUnion, which shows up on your credit report.
- Timely payments: Making all your payments on time can help maintain or even improve your credit score, especially if your BNPL provider reports to credit agencies.
- Late payments: If you miss payments, this will likely affect your credit file, just like any other form of borrowing.
New regulations
New regulations, set to come into effect in July 2026, will provide more protection for consumers. These regulations will introduce checks to ensure that shoppers can afford the repayments before they commit to BNPL agreements.
Additionally, BNPL purchases will fall under Section 75 protection, which currently only applies to credit card purchases over £100. This means that if a purchase is faulty or not as described, you’ll have more protection and potentially the ability to reclaim your money.
Benefits of BNPL schemes
- Manageable payments: BNPL allows you to spread the cost of purchases over time, making it easier to manage your budget and avoid high upfront costs.
- Interest-free options: If you make payments on time, many BNPL options are completely interest-free, meaning you only pay the amount you borrowed – without added fees.
- Convenience: The process at checkout is quick and easy compared to other forms of borrowing.
- Flexibility: BNPL schemes can offer flexibility for unexpected expenses. If you need to buy something urgently but can’t afford to pay immediately, BNPL can give you the breathing room to make the purchase without worrying about immediate payment.
Drawbacks of BNPL schemes
- Late fees: If you miss or make a late repayment, you could face fees, which can quickly accumulate and increase the total cost of your purchase.
- Risk of overspending: Consumers may be tempted to purchase items they can’t truly afford, leading to financial strain later.
- Impact on credit: Missed payments or outstanding debt can have a negative impact on your credit file.
- Tracking multiple agreements: If you have several BNPL agreements at once, it can be difficult to keep track of all the instalments, leading to missed or late repayments.
Borrowing responsibly with Evolution Money
Buy now, pay later can be a useful short-term solution. However, if you’re looking to borrow for ongoing or larger expenses, consider a secured loan with Evolution Money.
Our wide range of options allow homeowners to borrow with flexible repayment terms, starting from three years. Check your eligibility today without impacting your credit score. You can also contact our friendly team and visit our help and advice hub for more information.
Loans are subject to status and affordability checks.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debts secured on it.
Representative 21.54% APRC (Variable)
For a typical loan of £12,000 over 60 months with a variable interest rate of 21.54% per annum, your monthly repayments would be £310.60. This includes a Product Fee of £1,200.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £18,635.80. Annual Interest Rates range between 8.6% to 27.87% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
