If you’ve ever started shopping online, you’ve definitely seen the “buy now, pay later” option. Companies like Laybuy often promote it, and there is also more conventional catalogue finance from online retailers.
Although it may be tempting to postpone payment – and advertisements can sometimes be quite convincing and often deceptive – it is can be a slippery slope to being entangled in debt if you are not careful.
What is buy now pay later?
Buy now, pay later contracts are often referred to as store financing. They allow you to buy products on credit and repay them over time, typically in instalment payments or after a fixed interest-free duration.
Although this recurring billing is accepted in some high-street stores, it is most widely used by catalogues and online stores. They are frequently targeted at children and families. Laybuy stores are one of the best examples of famous buy now pay later providers.
Some deals allow you to pay after a certain amount of time (thus the name), while others allow you to pay for your transactions in monthly payments (sometimes referred to as “slices”).
Why is it so popular?
This form of finance has been around for a while, but it has recently gained popularity among younger customers, thanks in part to sleek marketing campaigns featuring A-list celebrities from famous TV shows.
These advertisements also fail to emphasize the dangers of paying in this manner.
Risks include risk to your credit rating if you are late or miss a payment, as well as high interest and fines if you are unable to pay what you borrow on time.
Advertisements on social media often target customers who are less able to afford the goods and persuade them to purchase now and pay later. Not only do buy now pay later services do this, but so do some online retailers, particularly clothing retailers.
Buy now, pay later is a simple-to-use service with innovative utilization and a low minimum spend of $10.As a result, it’s not surprising that many people are inclined to use it to pay for purchases.
However, it is easy to overlook the huge negative effect it will have on your loan and credit rating if you do not keep up with your repayments. However, you should note that these risks only apply if you go out of control and started buying things you can’t afford all the time.
What will I be charged?
Exact charges differ by provider, but the amount you will pay is generally determined by the payment method you choose.
Pay in instalments
This is the process by which the overall amount of your purchase is divided into a few parts – usually three or four. Typically, you must make one upfront fee and grant the supplier permission to collect payment for the remaining monthly payments later.
If you fail to make these later payments, you will be charged hefty ‘late payment fees.’ If you manage to miss payments, these penalties will mount up.
This is where you postpone payment for the entire price of your transaction for a specified number of days – usually 14 or 30. You will not be required to provide payment information up front, but you will be required to pass a ‘soft credit check’ before your order is approved.
When it’s time to pay, you’ll normally get a reminder.