What is Buy Now Pay Later?

Have you seen Buy Now Pay Later options when online shopping? Read our guide on what Buy Now Pay Later means, how it works, whether it affects your credit score and more.

You might have seen Buy Now Pay Later options available when online shopping - but what you might not know is that this is actually a form of credit.

At Lowell, we want to encourage open and honest conversations about all sorts of financial matters. We know that getting to grips with all the different types of credit can be tricky. So we've created this helpful guide to explain what Buy Now Pay Later is, how it works, whether it can affect your credit score and more.

In this guide:

  • What does Buy Now Pay Later mean?
  • How does Buy Now Pay Later work?
  • Is it safe to use Buy Now Pay Later?
  • Does Buy Now Pay Later affect your credit score?
  • What's the difference between Buy Now Pay Later and credit cards?

What does Buy Now Pay Later mean?

To put it simply, Buy Now Pay Later (BNPL) agreements are a type of finance that let you buy products and pay for them at a later date.

These agreements will let you either pay the money back via regular instalments or after a certain period, for example, over three months, or to pay in full in 30 days. One of the reasons they can be an attractive payment option for shoppers is because they're a flexible payment choice, and some options are advertised as being interest-free.

Where can I use Buy Now Pay Later for purchases?

You'll have probably seen Buy Now Pay Later as a payment method when online shopping and in catalogues. There are a few different providers - and whilst it can be a common option for online retailers, you may have started spotting this in-store as well.

How does Buy Now Pay Later work?

Usually, you'll have to spend a minimum of £10 to select this as your payment method. Of course, the details of your BNPL agreement will vary depending on the provider. However, when it comes to paying, the most common options are:

Pay in instalments

This is when you've chosen to split the total purchase amount into a few separate payments, usually around three or four. Most of the time, you'll have to make one of these payments upfront and then give the provider permission to take the other instalments later.

Pay at a later date

This is when you opt to delay paying the purchase amount until a later date. Many providers will give you the option to do this either 14 or 30 days later.

To go ahead with this payment method, you'll have to pass a 'soft' credit check before your purchase can be accepted. A soft credit check is essentially a quick look at certain information on your credit report. This check is not visible to other companies. You will also normally receive a reminder when it gets close to the delayed payment date.

Is Buy Now Pay Later a credit product?

Yes, Buy Now Pay Later plans are a credit product, as you are being lent money when making purchases. That's why it's important to treat BNPL like any other form of credit and be responsible when using it, particularly because it's not regulated by the Financial Conduct Authority (FCA) yet.

Now you know a bit more about Buy Now Pay Later actually means and how it works, you might be wondering more about the different schemes themselves.

Some of the biggest providers of Buy Now Pay Later in the UK include Klarna, Clearpay and Laybuy. It's important to remember that each company has its own terms and conditions that you will need to review.

Is it safe to use Buy Now Pay Later?

As with any form of credit, it's important to make sure that it is safe to use and that it is the right payment method / solution for you. You may have seen confusing information concerning Buy Now Pay Later online and are feeling unsure whether it is trustworthy or not.

Like other forms of credit, if you're planning on using Buy Now then you should only borrow what you can afford. Please see details below for organisations that can provide you with additional information on Buy Now Pay Later and who can give you free, impartial financial advice.

Like other forms of credit, if you're planning to use Buy Now Pay Later then you should only borrow what you can afford.

Is Buy Now Pay Later regulated by the FCA?

Buy Now Pay Later (BNPL) products aren't currently regulated by the Financial Conduct Authority (FCA), but this is due to change in the future. As it stands, there isn't as much formal protection for consumers, including completing affordability requirements, compared to other credit products. Once regulated, however, this may change and will also mean customers will be able to take their complaints to the Financial Ombudsman Service (FOS).

Where to seek advice about Buy Now Pay Later

If you need additional support or have any concerns or questions when it comes to Buy Now Pay Later, then there are multiple organisations you can contact for free and independent advice, such as:


Stepchange is a debt charity that can help you if you’re struggling with your finances and keeping up with your BNPL payments. Their team of debt experts will help you understand your situation, along with offering guidance and support on other options available so that you can regain control of your finances. You can contact their debt advice helpline via phone or online.

Citizens Advice

You can also reach out to Citizens Advice which is an organisation that offers confidential assistance and advice on a range of problems including debt and money, housing, and work. You can contact them by phone and online, or you can visit your local Citizens Advice centre if you’d prefer to discuss things in person.

Does Buy Now Pay Later affect your credit score?

Before using it as your payment method, it's important to know that in the UK Buy Now Pay Later can affect your credit score. Typically, your credit score will only be affected due to missed or late payments, however, the details will be within the terms and conditions.

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.

What happens if I miss my BNPL payments?

If you do miss a payment or don't have sufficient funds in your account, then you might wind up with late fees and interest charges. You can find these details in the terms and conditions which is why it's important to properly read through them before signing up to anything.

Buy Now Pay Later providers are able to use the same debt collection methods as other creditors of unsecured debt. You can read our guide for more information on the debt collection process and what to expect.

Can Buy Now Pay Later lead to bad credit?

If you miss a payment and are charged late fees or interest and charges, you may also see this appear on your credit report. This could impact your credit score which in turn may make it more difficult to get future lending. And if you're consistently missing payments, this may result in your debt being sold to a creditor like Lowell.

What is the difference between Buy Now Pay Later and credit cards?

Making purchases through Buy Now Pay Later plans can initially seem quite similar to using credit cards, but there are some key differences, such as:

How often you make payments

BNPL plans often let customers pay for their purchases either in instalments or all in one go at a later date. Credit cards can also be paid overtime, but there is usually a minimum amount that has to be paid each month. If you don't pay this monthly minimum, then you could face extra fees.

Section 75 of the Consumer Credit Act

When you pay with your credit card you get Section 75 protection, which you don't get with a BNPL scheme. Having Section 75 protection covers you for purchases worth over £100 all the way up to £30,000 for free.

This means that your bank is jointly liable if you do have any problems, such as your delivery going missing or if you receive a faulty product.

If you do use BNPL then you won't receive this cover if something goes wrong. In that case, you'd have to see what cover your BNPL provider has, get in touch with the retailer or contact your bank.

Credit card checks

Credit card providers will do a 'hard' credit check, which means that they search your entire credit record. This search will show up on your credit report and could impact your credit score if you miss payments.

First Published: 22nd August, 2022

We hope you've found this guide useful.

At Lowell, we believe it's important to educate our customers on a wide range of different debt-related topics. This is because we want to help you become confident in handling your finances.

For more information and guides on debt and finance, and how Lowell can work with you, check out the rest of our debt guidance hub.

If you're a Lowell customer and you have concerns or queries about your debt with us, then please do get in touch. Our friendly and supportive team will be more than happy to help.