Deferred Payment Credit (DPC), more commonly known as Buy Now Pay Later (BNPL), is a type of credit that allows you to spread the cost of a purchase through a series of instalments, or delay payment until a later date.

Deferred Payment Credit (DPC) is the formal term used for BNPL under updated Financial Conduct Authority (FCA) regulations. However, for simplicity and ease, we will continue to refer to Deferred Payment Credit (DPC) as BNPL throughout this guide.

In this guide, we’ll explain how BNPL works, who may be eligible, how providers assess applications, and whether it can affect your credit score.

Jump to a section in this guide: 

• How does Buy Now Pay Later work?
• Am I eligible for Buy Now Pay Later? 
• Do Buy Now Pay Later providers carry out credit checks?
• Does Buy Now Pay Later affect your credit score?
• Are Buy Now Pay Later options interest-free? 
• What happens if I miss a Buy Now Pay Later payment?
• Is it safe to use Buy Now Pay Later?
• Is Buy Now Pay Later regulated by the FCA?
• Where can I seek advice about Buy Now Pay Later?

This content is intended to be an impartial guide about Deferred Payment Credit. Lowell Financial Ltd does not offer financial, legal or debt advice. You can find out more about the organisations you can contact in our guide on debt help and support.

How does Buy Now Pay Later work?

Buy Now Pay Later (BNPL) is typically offered as a payment option at checkouts, both online and in-store.

Popular BNPL providers in the UK include Klarna, Clearpay, PayPal and Zilch, as well as other lenders that offer instalment plans or deferred payment options.

To use BNPL, you'll usually need to meet a minimum spend requirement, which varies depending on the retailer and the provider you choose.

The most common payment options are:

1) Pay in instalments or Pay in Three

With this type of Buy Now, Pay Later (BNPL) agreement, you can spread the cost of a purchase over a fixed number of payments.

BNPL purchases are to be repaid in 12 or fewer instalments over a maximum period of 12 months.

Typically, you'll make the first payment upfront and then authorise the provider to collect the remaining instalments automatically.

As a form of credit, BNPL allows you to receive your purchase straight away while paying for it over time.

2) Pay at a later date

Many providers will give you the option to delay paying the purchase amount for either 14 or 30 days.

To proceed with either of these payment methods, you will have to pass an affordability assessment and a soft credit check before your purchase can be accepted.

Eligibility requirements vary between providers and are explained in more detail below.

Am I eligible for Buy Now Pay Later?

Not everyone will be eligible for Buy Now Pay later (BNPL).

To access BNPL credit, providers are always required to assess whether you can afford the repayments before approving your application.

The checks carried out vary between providers and may depend on factors such as:

• Your existing borrowing commitments
• Your repayment history
• Information held by credit reference agencies
• The amount you're applying to borrow

Some lenders may also use Open Banking, where you agree to share information from your bank account to help them assess affordability.

The aim of these checks is to help lenders determine whether the credit is suitable for your financial circumstances, and whether borrowing would place you under financial strain.

Do Buy Now Pay Later providers carry out credit checks?

Buy Now Pay Later (BNPL) providers will always carry out some form of credit assessment, but the type and depth of the check depends on the provider and the value of the transaction.

BNPL: Soft Credit Check

For shorter-term options, such as pay in 30 days and pay in 3 instalments, this will often involve a soft credit check and affordability assessment.

A soft credit check is a quick review of your credit report that allows a lender to assess your eligibility for credit without impacting your credit score.

Unlike a hard credit check, a soft check is not visible to other lenders.

A soft credit check will more than likely be carried out alongside other affordability assessments to help a lender decide whether to offer you the credit.

BNPL: Hard Credit Check

Longer-term or higher-value BNPL finance agreements - for example, spreading repayments over 6 to 12 months are more likely to involve a hard credit check, similar to applying for a loan or credit card.

A ‘hard’ credit check means that the provider will search your entire credit report, and this type of search is recorded on your report, so any company reviewing it will be able to see that you’ve applied for credit.

For more information about hard credit checks, how they affect your credit score, and what they mean for future applications, please visit Experian's guide on credit checks and searches.

Does using Buy Now Pay Later affect your credit score? 

Yes, Buy Now Pay Later (BNPL) can affect your credit score, depending on the provider, the type of agreement, and how you manage your repayments.

Some lenders may report your borrowing and repayment history to credit reference agencies, while others may only report missed payments.

A record of missed payments may lower your credit score and signal to other lenders that you've struggled to manage credit responsibly.

It's important to check your provider's terms to understand how your BNPL activity may be recorded.

If you'd like to find out more about the importance of your credit score, you can read our guide on how your credit file affects you. 

Are Buy Now Pay Later options interest-free?

Buy Now Pay Later (BNPL) options are interest-free, allowing you to delay or spread the cost of a purchase over several instalments without paying interest, as long as you make all repayments on time.

While Buy Now, Pay Later (BNPL) can be a convenient way to spread the cost of purchases, it's important to remember that it is a form of credit.

Before choosing a BNPL option, make sure you understand the terms and conditions and that you can comfortably afford the repayments. Missing payments could result in fees, additional charges, or other consequences, depending on the provider's policy.

What happens if I miss a Buy Now Pay Later payment?

If you miss a Buy Now Pay Later (BNPL) payment, your provider will contact you to arrange repayment and may charge late payment fees, depending on the terms of your agreement.

Some providers may also temporarily restrict your ability to make further BNPL purchases until your account is brought up to date.

Missed payments may be reported to credit reference agencies, which could affect your credit score. This could make it more difficult to access credit in the future, including loans, mortgages, and credit cards.

If you're having difficulty making repayments, contact your provider as soon as possible. They may be able to discuss options to help you manage your payments and avoid further consequences.

If you need additional support, visit our independent debt support hub for access to free, impartial debt advice and guidance.

Is it safe to use Buy Now Pay Later? 

Buy Now Pay Later (BNPL) is a regulated form of credit and may be a suitable payment option for some consumers.

However, as with any type of borrowing, it's important to understand:

• How much you'll repay
• When payments are due
• Whether missed payments could affect your credit score
• Any fees or charges that may apply

Before taking out any form of credit, including a BNPL agreement, it's important to make sure the repayments fit comfortably within your budget. Use our free budget calculator to review your income and expenses and help determine whether a BNPL purchase is affordable and manageable for you.

Is Buy Now Pay Later regulated by the FCA?

Yes. Buy Now Pay Later (BNPL) is regulated by the Financial Conduct Authority (FCA) as of July 2026.

This means BNPL providers must lend responsibly, carry out affordability checks and provide clearer information about your repayment obligations before you take out credit.

The new rules also give you access to the Financial Ombudsman Service if you have a complaint.

In short, FCA regulation aims to make Buy Now Pay Later safer and more transparent for customers that choose to use it.

Where can I seek advice about Buy Now Pay Later?

If you need extra support with Buy Now, Pay Later (BNPL) repayments or have questions about managing debt, you can access free, independent guidance from organisations such as StepChange, MoneyHelper, and Citizens Advice through our Free Independent Debt Advice & Support hub. 

Last updated: 15th September 2026