Understanding buy now, pay later

Buy now pay later schemes allow you to purchase items immediately and delay payment typically for up to three months after you’ve bought them, or spread payment over several instalments. This type of debt is popular for online shopping and is often for low amounts of money and interest-free if paid within the the agreed time frame.

How it works

You buy a product and agree to pay in instalments, typically over a few months. Interest is usually charged if the debt isn't paid within the promotional period. However, if you miss a payment you are usually charged a relatively high amount of interest.

Positives

There is no interest if payments are kept up with so it can be convenient for short-term cash flow needs.

Negatives

It can be tricky to keep track of, particularly if you have several taken out simultaneously and there is high interest rates if not repaid on time, also can affect credit score if payments are missed.