Learn How ‘Buy Now, Pay Later’ Works

Buy now, Pay later sounds so spicy. Offers sound to be the flavor of the season.


As you know, many e-commerce banks have recently lined up such interesting schemes for upcoming festive seasons. So by taking benefits of buying now and paying later, many borrowers can now enjoy things they want to purchase without having a credit history. Thanks to the covid-19 pandemic, many middle-class people like us have had to tighten up their purse strings, and now this scheme looks even more attractive. 

What buy now, pay later means

Buy now, pay later, is a type of installment loan. It divides the amount of purchase you have made into multiple equal payments. The first is due at checkout, and the remaining payments are billed to your debit or credit card you offer until your purchase is paid in full. Point-of-scale credits are also known; some schemes give you 30 days to pay after buying, while others offer 12 months.

How buy now pay later works


All Buy now, pay later schemes or plans are not the same. Each company has its own rules, terms, and conditions, but generally, their point of sale installment loans are operating along the following lines:

  • You make a purchase at a participating distributor and select for Buy now, pay later at checkout.
  • If approved (they will tell you in seconds), you will make a very small down payment, which could be 25% of the overall purchasing amount.
  • You then pay off the remaining amount due in a series of interest-free installments monthly or weekly.
  • You can pay your amount via debit card credit or by bank transfer; payment can also be automatically deducted from your debit card, bank account, or credit card.

Do not miss a payment.

Because of the rules and conditions of how Buy Now, Pay Later work, the outstanding balance can immediately become expensive if you miss any payment or don’t make the repayments on time. If you will not clear your repayments or debt before the delayed period is up. Some providers will ask for a settlement fee, or a lump sum of interest may be added to the amount you have to pay. On top of that, you could be charged late payment fees too. Missed payments, late payments could also be recorded on your credit or debit report and affect your credit or debit score. So, make sure you set calendar reminders or alarms on your phone and alerts to make sure you clear the debt on time before interest is added or your score gets affected.

Does buy now, pay later affect your credit score

Everyone knows that buy now pay later is the form of credit. So, how you use it will affect your overall score. If you delay your payments regularly, it will negatively impact your credit score. Still, if you are financially educated and use buy now pay later sensibly, it will not affect your credit score. In any case, if you miss a payment or not be able to repay when the time comes because of financial issues, then you can be listed on a defaulters’ list and your credit report. This mark is dangerous. It could stay for almost six years on your credit card by lowering your credit score. This means that when you apply for a loan, credit card, or mortgage in the future, the lender will check your score, and how you used to buy now pay later could affect whether your application is approved or rejected depending upon how you use it.