Should You Use the 'Buy Now, Pay Later' Option?

As more retailers and apps offer Buy Now, Pay Later (BNPL) options, it’s easier than ever to spread out payments on everything from clothing and electronics to groceries and food delivery. But before you say “yes” to those four easy installments, it’s worth understanding the real costs and potential credit consequences of BNPL plans.

At Sunset Finance, we’re committed to helping you borrow responsibly and make informed financial decisions. Here’s what you need to know about BNPL services before you click "pay later".

Understanding 'Buy Now, Pay Later' Options

What are 'Buy Now, Pay Later' Options? 'Buy Now, Pay Later' options, also known as BNPL or installment plans, allow shoppers to make purchases upfront without immediate payment. Instead, the total amount is divided into smaller installments, typically paid over a set period. This payment method has gained popularity due to its convenience and flexibility, making it an attractive alternative to traditional credit cards.

As the popularity of 'Buy Now, Pay Later' (BNPL) options continues to grow, several platforms have emerged as leaders in this space. Let's take a closer look at some of the most popular BNPL services that are making waves in the online shopping world:

• Klarna: Klarna is one of the most well-known BNPL providers, offering flexible payment options for online shoppers. With Klarna, users can choose to pay in installments over time or defer payments for a set period. The platform collaborates with a wide range of online retailers, making it convenient for shoppers to access BNPL services across various industries. Klarna's user-friendly interface and easy approval process have contributed to its widespread adoption among consumers.
  
  
• Afterpay: Afterpay is another leading BNPL service that has gained popularity in recent years. It allows users to split their purchases into four equal installments, payable every two weeks. Afterpay does not charge interest on purchases, and as long as payments are made on time, there are no additional fees. With its seamless integration into online retail stores and straightforward payment structure, Afterpay has become a favorite among shoppers seeking a hassle-free BNPL experience.
  
  
• PayPal Pay in 4: PayPal Pay in 4 is an extension of the popular online payment platform, PayPal. It allows users to split purchases into four interest-free payments, paid every two weeks. This option is available to eligible PayPal users and can be used at any online store that accepts PayPal as a payment method. PayPal Pay in 4 provides a convenient and secure BNPL option for those already familiar with PayPal's services.
  
  
• Zip (Previously Quadpay): Zip offers a BNPL solution that allows users to split their purchases into four equal installments, payable every two weeks. With no interest fees and a straightforward approval process, Zip has attracted a significant user base. Zip's mobile app integration makes it easy for users to manage their installment payments and keep track of their spending.
  
  
• Affirm: While originally known for its financing solutions for larger purchases, Affirm has also ventured into the BNPL space. Affirm offers transparent and flexible payment plans with fixed interest rates, making it easy for consumers to budget for their purchases. Affirm's partnerships with various online retailers give shoppers a wide array of options when using their BNPL services. Recently you may have noticed that big online retailers like Walmart and Amazon now provide Affirm as a payment option for online purchases.

These services offer flexibility and convenience, but they come with new risks. While these services offer attractive benefits, it's crucial to use them responsibly and understand the terms and conditions to avoid potential pitfalls. As you explore BNPL options, consider the Pros and Cons of using these payment options. 

Pros of BNPL Options

No Upfront Payment:

BNPL allows you to purchase items without the need to pay the full amount upfront, making it a budget-friendly option.

Easy Approval Process:

Many BNPL providers offer instant approval, making it accessible to a broader range of consumers, including those with limited credit history.

Interest-Free Periods:

Some BNPL plans offer interest-free periods, allowing you to spread payments without incurring additional costs if paid within the specified timeframe.

Flexible Payment Terms:

BNPL options often provide flexibility in choosing payment terms, allowing you to customize the plan according to your financial capabilities.

Potential Pitfalls or Cons of BNPL Options

Risk of Overspending:

The allure of deferred payments can lead to overspending. It's crucial to maintain self-discipline and set a clear budget to avoid accumulating unnecessary debt.

High Late Fees and Interest Rates:

Failure to make timely payments may result in high late fees and interest rates, ultimately increasing the overall cost of your purchase.

Credit Implications:

As of Fall 2025, major credit reporting company FICO will begin including BNPL loans in their credit scoring models. What does this mean for you?

• Late BNPL payments could lower your credit score

• On-time BNPL payments might help your credit history

• BNPL will no longer be “invisible” to lenders

According to a recent LendingTree report:

• 42% of BNPL users have missed at least one payment

• 25% are using BNPL for everyday purchases like groceries and delivery

That means many Americans may soon feel the impact, positive or negative, on their credit profiles.

Tips for Responsible Use of BNPL Options

Set a Realistic Budget:

Before using BNPL options, create a realistic budget that aligns with your financial capacity. Be mindful of your other financial obligations to avoid overspending.

Read our Guide to the Basics of Budgeting to learn how to create a budget that fits your needs.

Read and Understand Terms and Conditions:

Thoroughly review the terms and conditions of the BNPL plan, including the payment schedule and any associated fees. Ensure you understand the consequences of missed or delayed payments.

Track Your Payments:

Stay on top of your installment payments by setting reminders or using budgeting apps. This will help you avoid late fees and potential damage to your credit score.

Comparison Shopping:

Don't limit yourself to a single BNPL provider. Compare various options to find the one with the most favorable terms and conditions.

The Importance of Responsible Borrowing

At Sunset Finance, we prioritize responsible borrowing and financial well-being. While BNPL options can offer convenience, it's essential to use them responsibly and avoid accumulating unnecessary debt. As you plan your monthly spending, consider other responsible financing options available, such as personal installment loans.

Sunset Finance offers personal installment loans with fixed payments over a specified term. Our loans provide flexibility and predictability, making it easier for you to manage your budget.

Before using 'Buy Now, Pay Later' options, weigh the pros and cons to ensure a financially sound decision. Responsible budgeting, understanding the terms and conditions, and setting realistic goals will help you enjoy life without unnecessary financial burdens.

More Budget Planning Resources

If you haven’t yet taken the time to budget your expenses and you are feeling overwhelmed, you may consider a personal loan to help spread some of your immediate costs out. Sunset Finance offers installment loans with fixed payments for a set term. This allows you to fit the loan payment into your monthly budget. Also, making on-time, in-full payments to a personal loan can help build your credit.

If you would like more resources on personal finances and budgeting, check out these resources:

• Download our Free Simple Monthly Budgeting Worksheet
• Check out our online resource center for more budgeting basics and more
• Learning to manage a budget becomes a fairly simple task with a bit of practice. Take a look at The Basics of Budgeting to get started.