It’s right there in the name, A Buy Now Pay Later loan is a form of financing that allows you to make purchases now, but pay for them later. This means you can pay for goods and services in small amounts, breaking the payments up over months or even years.

BNPL allows people to purchase goods through small loan amounts and pay them back in manageable monthly instalments, or all at once at a later date, enabling people to either spread the cost of purchases or make purchases when they might be waiting on funds.

What is Buy Now Pay Later debt?

Buy Now Pay Later debts refers to the outstanding balances of any purchases, and any fees or charges associated with a BNPL financial agreement.

When it’s paid off within the specified time frame, a BNPL loan isn’t accompanied by extra costs. However, if you fail to abide by the terms of your agreement, it can incur late fees. You could find yourself struggling with BNPL debts if you don’t fully understand the terms, or have a change in circumstance that means you can’t make a payment one month.

BNPL debt, like other loans and lines of credit, can quickly add up and cause financial strain. This debt will continue to build if left unpaid due to higher interest rates.

Can Buy Now Pay Later affect my credit score?

The effect that Buy Now Pay Later can have on your credit score can vary. Though it is often promoted as an easy way to split payments, it is a financial agreement and it’s important to understand what you’re agreeing to and what the consequences would be if you’re unable to pay.

BNPL companies can run hard checks on your credit report to determine your credit-worthiness, which can hurt your credit score. It’s a good idea to find out for sure if the provider runs credit checks for this type of credit before making a decision.

Similarly, if you have taken out multiple lines of BNPL credit this will also be recorded on your credit score (though this doesn’t necessarily mean it will be recorded negatively). Companies can see this information on your credit report and it may be used when factoring in your credit-worthiness.

If you’re unable to repay your BNPL payments on time and fall into arrears, this may also affect your credit score. If your debts reach 90 days without repayment your account may default. Once a default is recorded on your credit score it will remain on your report for 6 years.

What are some Buy Now Pay Later services?

A range of retail and financial providers have started to offer Buy Now Pay Later payment options as part of their service on checkout. Here are some common ones:

Can you use Buy Now Pay Later as a debt solution?

If you are currently in a debt solution, we would always advise you not to take out further credit. Though you may still be able to apply for Buy Now Pay Later credit, if a credit check is required it’s unlikely to be accepted.

Further credit isn’t allowed on formal debt solutions like Individual Voluntary Arrangements (IVAs), but even with more informal solutions like Debt Management Plans (DMPs), it’s best to focus on your current repayments and wait until after your debt solution has ended before taking out further credit.

What do I do if I can’t afford my Buy Now Pay Later repayments?

If you find yourself struggling with BNPL repayments, it’s important to be upfront about your debts. Creditors must ensure agreeable repayments with their customers, meaning that if you are unable to pay, they have to support you.

Ignoring your debts or trying to hide from your creditors will only lead to further debt and damage to your finances as late payments and fees pile up. This is why it’s important to be proactive and open with your creditors when facing unaffordable debt. If you’re dealing with unaffordable BNPL debts you should seek debt advice as soon as possible from a company regulated to give advice on a range of debt solutions.

Companies regulated to give debt advice are able to suggest what solutions would work best for you, and some can manage solutions for you, meaning they’ll speak to creditors on your behalf and fight for interest and charges to be frozen.

Can I get help with my Buy Now Pay Later debts?

Dealing with BNPL debts can be stressful. Luckily, help is out there if you’re struggling to keep up with your debts.

Breathing Space: If you’re finding it difficult to cope with your debts and you’d benefit from some time to figure out a solution, you can apply for Breathing Space. Introduced in 2021, this government scheme is a debt respite scheme designed to support vulnerable individuals in gaining back control of their debts. Breathing Space provides you with up to a 60-day grace period from your debts. This grace period can be extended for those struggling with serious mental health concerns. Breathing Space works in two ways:

Standard Breathing Space: This is the standard form of the scheme which is available to people who haven’t already entered the scheme in the last 12 months. By entering the scheme, you are given legal protection from your creditors. This means you can halt your repayments, as well as contact from your creditors, for up to a period of 60 days. Using Breathing Space gives you the opportunity to get a better handle on your debts, making it easier for you to put a plan in place to repay the money you owe.

Mental Health Crisis Breathing Space: As its name suggests, this type of Breathing Space is for those currently receiving treatment for serious mental health crises. It offers individuals who are in a vulnerable position powerful legal protection against creditors. This protection usually lasts for the duration of the person’s treatment, plus an extra 30 days regardless of how long the length of treatment is. To qualify for this type of Breathing Space, you’ll need to provide confirmation from an approved mental health professional that you’re receiving mental health crisis treatment.

Breathing Space enables you to have some space from your creditors. This gives you the time you need to work out a more permanent and realistic repayment solution without the worry and pressure of trying to keep up with payments.

Find out more about Breathing Space here.

Seek professional debt advice

Most importantly, if you are struggling with unmanageable debts, you should think about getting professional debt advice. When you get in touch with our debt advisors, we can assess your financial situation, taking all of your current debts into consideration to ensure that we provide the best possible advice on how you can realistically repay your debts in a way that works for you.

Choosing the right debt solution

At MoneyPlus, our team of experienced debt advisors will work alongside you to get your chosen debt solution set up. There are lots of different debt solutions, but the right one for you will depend on a number of factors. Some of the debt solutions we offer include:

Individual Voluntary Arrangement

An Individual Voluntary Arrangement (IVA) is a type of debt solution that combines all of your debt repayments into one affordable monthly repayment. A formal and legally binding debt solution, an IVA is an alternative to bankruptcy. Once you have agreed to it, it’s important that you stay on track with your monthly repayments. When you have been making your repayments over a set period of time (usually between 5 and 6 years), any debt that’s left remaining will be written off. 

For those who live in Scotland, the equivalent debt solution is referred to as a Protected Trust Deed. It acts as an alternative to Sequestration for those who have debts exceeding £5,000 and it usually lasts for 4 years.

Debt Management Plan

A Debt Management Plan (DMP) is an informal solution that allows you to repay your debts at a more realistic rate over an extended period. The details of your DMP are agreed between both you and your creditors. Your repayment rate and the time over which you repay your debts will be determined based on what you are able to afford.

Debt Arrangement Scheme

A Debt Arrangement Scheme is only available to Scottish residents. Similar to a DMP, this solution is not a form of insolvency, and no debt will be written off. However, there are some similar advantages shared with formal insolvency solutions that you would benefit from. Creditors will not contact you, and interest and charges are guaranteed to be frozen.

Bankruptcy

Bankruptcy (Sequestration in Scotland) is available but may not be suitable for everyone. Smaller forms of Bankruptcy are available for those with lower debt levels: Minimal Assets Process in Scotland, and Debt Relief Orders elsewhere. Depending on how much you owe, creditors may be able to petition for Bankruptcy on your behalf, however, this would not be their first option. If you are concerned about this, you should speak to a qualified advisor.

Want to find out more about the different debt solutions that may be available to you? Check out our debt solutions page to learn which solution might work best for you and your financial situation.
You can receive free and trusted debt advice from professional debt charity MoneyHelper.