Buy Now, Pay Later: What You Need to Know

Buy now pay later is an old style of making purchases that has found new life. The rise of online shopping, the COVID-19 pandemic, and ease of use drive its increased popularity. Buy now pay later has become a very accessible method for making almost any purchase. In some ways, it has become the preferred method of payment over credit cards and other similar types of financing. With online shopping carts offering this payment method at almost every purchase and store. You may want to know more about buy now pay later before you use it. Everything you need to know can be found in this guide!

If you are struggling with debt you may benefit from reading, Canada Debt: How much is too much?

Buy now pay later

What is buy now pay later?

Buy now pay later lets consumers finance purchases over a short period of time. It is a form of credit, usually offered at the time of purchase through online point of sale systems. There is typically no hard credit check to use the service. In addition, there is no need to apply for it, you can access the service quite easily. These short-term loans are paid over a few weeks or months. They can have zero percent interest, allowing you access to a product or service immediately. But if you miss a payment, extremely high penalties can apply. Missed payments can also impact your credit score as these lenders have started to report to the credit bureau.

When the purchase is needed, buy now pay later can be a good financing option. Trends show consumer goods like clothing are the most bought product with buy now pay later. Normally, consumer clothing would not be the most needed item to buy on credit. Increasingly, consumers are using buy now pay later to spread a purchase out over time to ease cash flow.

Buy now pay later is also referred to as:

  • Installment payment plans
  • Retail financing plans
  • Installment loans
  • BNPL

How does buy now pay later work?

Installment payments are made in a few different ways with buy now pay later. You should understand the terms of the specific plan you are using before you proceed. This means reading the fine print to understand what you owe and when. Be sure to read over the potential penalties surrounding missed or late payments as well.

Typically, buy now pay later plans outline:

  • The agreement of purchase with the retailer
  • The finance agreement with the financial service provider, including:
    • Total purchase price
    • Payment amounts
    • Frequency of the payments
    • Number of payments
    • Interest rate (even if it’s 0%)
    • Fees

These agreements are between the consumer, retailer, and the financial service provider. A consumer can ask the retailer or financial service provider for clarity on the specific terms. Each buy now pay later agreement varies depending on the retailer and financial service provider.

The most common type of buy now pay later plan is the equal payment plan. With an equal payment plan, you have your total purchase price divided into equal payments over a specified period of time. For example, a purchase of $100 is turned into 4 equal payments of $25 over 4 weeks.

The second version of the buy now pay later plan is the deferred payment plan. This is when the total balance owing is deferred to a date in the future. For example, you make a $100 purchase today, pay a small deposit of $25 and agree to have the remaining $75 paid by July 31st.

Both methods of buy now pay later require a deposit or initial payment. This is because the retailer and financial service provider wants to see some cash upfront. However, they are willing to collect the remainder of the payment later on.

Related Reading: Tips on How to Save Money

What companies offer buy now pay later technology?

The buy now pay later technology actually began in the 1980s, perhaps even earlier. Department stores, like Nordstrom, allowed customers to purchase items using private credit and pay the balance at a later date. However, the technology resurfaced during the pandemic through online stores. Now, many vendors offer buy now pay later through their online platforms.

In terms of financial service companies offering buy now pay later, many have popped up on the scene in recent years. These are the largest ones and their typical features:


  • Simple and straight forward
  • The first payment is made at purchase, following 3 payments over 6 weeks
  • 4 payments total
  • Smart limits, helps you manage your short term financing
  • Reminders for upcoming payments
  • Check out all online shops that partner with Afterpay in Canada, including NARS, Shiseido, The Shoe Company, and many more

PayPal Credit

  • No late fees
  • Available with most online shops that accept PayPal
  • Approval happens quickly
  • Get PayPal Purchase Protection on qualified purchases.
  • Pay monthly
  • 6, 12, or 24 payments total
  • 9.99% to 29.99% Interest on monthly program
  • $199 to $10,000 spend required for monthly program
  • Check out all retail partners, including Walmart, Bose, and more

PayPal Pay-in-4

  • No late fees
  • Available with most online shops that accept PayPal
  • Approval happens quickly
  • Get PayPal Purchase Protection on qualified purchases
  • 4 interest-free payments, first payment is your deposit
  • Pay bi-weekly
  • $30 to $1,500 spend required for Pay-in-4 Program
  • Autopay set up right away
  • See all retail partners


  • Allows you to spread out your shopping expenses
  • Never affects your credit score
  • No fees
  • Must pay on time
  • Make 4 payments, every 2 weeks
  • Check out all online shops that partner with Klarna in Canada including lululemon, Mountain Equipment Company, Sephora, and many more


  • PayBright is now Affirm, the Company has rebranded
  • No hidden fees, all terms described immediately
  • Simple to apply
  • Application does not impact your credit score
  • Choose how to pay
  • You the payment option that works for you:
    • 4 interest-free payments every 2 weeks, or
    • Monthly installments
  • Manage your payments in the Affirm app or online
  • Larger payment plans may include interest, details will be provided
  • Affirm partner retailers can be found on their homepage, including Amazon, The Source, CheapOair, and more


  • Pay in 4 installments over 6 weeks with 0% interest
  • Option to pay monthly with different interest rate
  • Website states customers have experienced an increase in credit score by paying on time and in full
  • Simple to apply
  • Over 47,000 brands to shop at
  • Sezzle app allows you to shop in store at select retailers
  • Monthly payment are subject to interest rates from 5.99% – 34.99%
  • See all retail partners, including Target, SoftMoc, and others

What websites allow you to buy now and pay later? 

Most major online retailers now accept some version of buy now pay later. Above there are links for each financial service providers retail partners. Major retailers who accept buy now pay later include Target, Amazon, Apple, and Shein.

Are buy now pay later bad for credit?

Most buy now pay later financial service providers perform soft credit checks. This does not affect your credit score. However, some buy now pay later financial service providers do hard credit checks. A hard credit check will affect your credit score negatively by a few points. But in the long run, hard credit checks fall off your report thereby improving your score.

In addition, some loans are reported to credit bureaus, Equifax and TransUnion. If a buy now pay later vendor reports to the bureau, this produces credit history. How reported information affects your credit score has many factors. Its important to always make your payments on time and in full for buy now pay later programs (as with all other forms of financing that appear on your report). Otherwise, your credit might take a hit since credit history has the largest impact on the score. Furthermore, if the account goes into collections, this information will appear on your credit report as well.

To conclude, buy now pay later does not negatively affect your credit score. But if you fail to repay the loan, it could have a negative impact on your score. Always make sure that you’re taking on debt you can afford to repay!

Does buy now, pay later count as a loan?

Buy now pay later is technically a loan. A financial institution is assisting you with supplying cash to complete a purchase. In turn, you repay money over time; it is short term financing. Although, how buy now pay later loans are reported to credit bureaus is different. Some programs report everything, others only report delinquencies. With your typical loan from a big bank, all information would always be reported to the credit bureau.

Does pay later improve credit score?

If a buy now pay later program is reporting to a credit bureau, it affects your credit score. How it affects your credit follows a credit score rating system. In general, having a good credit history helps improve your credit score. Good credit history includes things like: paying on time, not borrowing too often, and not overutilizing too much credit available. If the buy now pay later service reports to the credit bureau and you always pay on time and in full, it can improve your credit.

Related Reading: How is your credit score calculated in Canada?

Who uses buy now pay later the most?

Younger consumers tend to use buy now pay later programs more than their older counterparts. Here’s some more details as of 2023:

  • 46.5% of Generation Z used buy now pay later
  • 39.5% of Millennials used buy now pay later
  • Only 12% of baby boomers used buy now pay later

On a broader scale, there are about 360 million users on buy now pay later platforms. In addition, the service is most commonly used for clothing purchases.

Is buy now pay later a good idea?

Buy now pay later can be useful for products you really need, like a new fridge or clothing for work. In fact, some prefer to use buy now pay later over credit cards because of the repayment terms and low or non-existent interest.

The problem with buy now pay later is consumers are using it for everyday lifestyle purchases. This can assist you if are good at budgeting, but it could also land you in a dangerous position financially. It can be easy to buy a ton of things online with the service, then be hit with tons of repayments later.

Read More: Personal Finance and Why is it Important

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