What is buy now, pay later?

A buy now, pay later (or BNPL) loan is a form of short-term financing that allows consumers to pay their bill incrementally over several weeks or even months, rather than all at once.  

Unlike credit cards, BNPL plans typically don’t charge interest. And providers don’t run a hard credit check, so the loans are particularly attractive if you have bad credit or no credit history. 

According to a 2025 Lending Tree survey, nearly half of Americans have used a BNPL service like Klarna or Affirm and close to a quarter (23%) have had three or more active BNPL loans at one time.

First introduced in 2019, the BNPL phenomenon has grown from standalone providers to retailers like Walmart and Apple, and even online giants like Amazon and DoorDash.

An estimated 91.5 million Americans will use BNPL in 2025.

BNPL is a form of short-term installment loan that allows you to complete the sales transaction and receive the goods or services while breaking down payment into several smaller increments. The first payment is due at checkout, followed by regular installments until the balance is paid off. 

Most BNPL services offer “pay-in-four” installment plans, which set payments two to four weeks apart, matching many people’s pay periods.

At checkout, you may see the option to pay in installments. If you select it, you’ll be directed to fill out an application with personal details like your name, contact info, Social Security number and chosen payment method.

The BNPL provider conducts a soft credit check that won’t hurt your credit score and, if you’re approved, will present you with a payment plan.

If you use a pay-in-four BNPL plan to purchase an $800 iPhone, for example, you would pay $200 at checkout. You’d then make $200 payments every two weeks until the phone was paid for in six weeks.

The pay-in-four plan doesn’t usually include interest, but BNPL plans with longer repayment terms can charge annual percentage rates as high as 36%.

You could also be hit with late or rescheduling fees, which can be $10 or more depending on your provider.

While traditional forms of financing, like credit cards and personal loans, appear on your credit reports and are factored into your credit score, the picture for BNPL is less clear.

FICO said it would begin including BNPL information in credit scores in fall 2025, but top providers like Klarna and Afterpay say they won’t send data to the credit bureaus for consideration.

Affirm has been sending its loan data to Experian, Equifax and TransUnion and is working with FICO to develop credit score models that include its BNPL data. But it’s not clear if banks and other lenders would use that model when assessing a customer’s creditworthiness.

However it pans out, paying your BNPL installments on time and in full will protect your credit score. In addition, try to only take out one BNPL loan at a time.

BNPL can be a helpful way to break larger payments into more manageable increments without the risk of being hit with enormous interest rates.

But that same convenience can make them a risky proposition if you’re not confident you can make timely payments. BNPL loans can cloud your idea of your budget, or tempt you to take out multiple short-term loans at once.

Lending Tree found that 23% of BNPL users had three or more loans active at one time and 41% paid one of their BNPL bills late.

In addition, returning items bought via BNPL can be difficult, so make sure you’re certain about your purchases.

There are advantages and drawbacks to consider before using BNPL.

Pros

• Smaller payments that are often interest-free
• Quick approval process
• Don’t need a high credit score for approval

Cons

• Can encourage reckless spending
• May be hit with late fees
• Returns and refunds can be complicated
• May damage your credit score

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