Business programme
Start-Up, Scale-Up by Lloyds Bank Academy
-
Learn for yourself
Money, digital, career skills
-
Money skills
Learn for yourself
-
-
Learn for business
To help start up and grow
-
Strategy and operations
-
-
Marketing, website and digital
Learn for your business
-
-
Help others learn
Money and digital skills
Help others learn
Buy Now Pay Later
Learn how ‘Buy Now, Pay Later’ works, its risks and benefits, and how to use it safely within your budget.
Introduction to 'Buy Now, Pay Later'
‘Buy Now, Pay Later’ (BNPL) may be a new term to you, but the chances are you’ve used it or thought about it.
Simply put, it’s a way to pay that lets you borrow money quickly so you can buy something now. You then pay back this money later, either all in one go or in smaller payments over a set amount of time. So, you could buy a £120 bike at no cost today. Then over the next year, you could pay back £10 a month.
It’s important to remember that BNPL is a type of borrowing. Eventually, you’ll need to pay that money back. So you need to be aware of the risks before you sign up for it.
In this lesson, you’ll learn more about Buy Now Pay Later. We’ll explain the risks as well as where it might help. So when you see that payment option, you’ll be able to decide if it’s the best one for you.
What you'll learn
The risks and benefits of Buy Now, Pay Later.
How it works.
How to decide if it's right for you.
How long it takes
8 minutes
Pros and cons of BNPL
Chapter 1
How long it takes
3 minutes
When you might use BNPL
42% of UK adults have used BNPL – that’s around 22.6 million people!
We’ve all been there. An unexpected cost, a more expensive month than you planned.
For example:
- Your washing machine has broken, and you don’t have enough to buy a new one.
- You’ve not got enough right now to buy your family something for Christmas.
- You need new clothes, but the cost of what you need now means you have less money for other things.
The benefits and risks of BNPL
This way of paying is widely available, with lots of companies now offering it online and in stores. So let’s look at the pros and cons of this type of borrowing.
It lets you spread the cost
You may find it easier or less stressful to pay smaller amounts over time, rather than one big payment up front.
You'll be paying for longer
If you spread the cost, you’ll need to keep on top of your budget every month during that time – and remember to make each of those payments.
You can delay payment
This could help if you need something but can’t afford it at the moment. It may be within your budget, but you just don’t have the money for it right now.
You may not be able to 'pay later'
Delaying payment to later dates assumes that you’ll be able to afford those payments. If you can’t, that’s when the costs can increase and you find yourself owing far more.
It may be cheaper than other options
Most BNPL options won't charge you interest. They don’t usually charge fees either, as long as you make your repayments on time and in full. This can make them cheaper than other types of borrowing.
Not all BNPL schemes are free
Though BNPL can be fee and interest free, not all are. Some may charge you for using BNPL. Others might have costs like late fees for missing payment dates. Be sure to check the terms first, so you know what the charges are.
The checks don't affect your credit score
When you apply for a loan or a credit card, the lenders run quite a few checks. These show up on your credit report. So other lenders can see what you’ve applied for. Most BNPL lenders just run a quick check, which doesn’t usually show up on your credit report.
Paying late may lower your credit score
Not making your BNPL payments on time can affect your credit score. Lenders use this score to decide if and how much they will lend you. So you may not be able to borrow or get credit elsewhere if you don’t keep up your repayments.
What about payment protection?
There’s one more risk that’s likely to change soon. BNPL doesn’t currently give you the same security as some other ways to pay. Bought something that costs more than £100 and there’s a problem? Credit card companies can help you get your money back. BNPL doesn’t have this – yet.
The law is due to change in July 2026, so BNPL companies will need to protect you in a similar way to credit card providers. This includes affordability checks and support when things go wrong.
Test your knowledge
Try again - that's not quite right!
Hint: late payments can impact your credit score and may mean extra charges too.
That's right!
The best way to avoid extra fees is to keep paying the right amount by the right dates.
Steps to using BNPL
Chapter 2
How long it takes
2 minutes
How Buy Now, Pay Later works
Select 'Buy Now, Pay Later' at the checkout
There may be one or more BNPL options to choose from. Check what each one offers, and pick the one that works for you.
Check your repayment details
This might be the full amount on or by a certain date. Or smaller, regular payments to spread the cost.
Give your card details
You may find the BNPL provider asks for these at checkout. This means they can take your repayments automatically, when they’re due.
Checks and confirmation
Some providers run a ‘soft’ credit check. This doesn’t affect your credit score. You’ll get an answer straight away to let you know if you can use this service to pay.
Make the payments
If these aren’t automatic, it’s good to make a note of when they’re due. If you miss a payment or pay late, you may end up paying extra. It may also affect your credit score, making it harder to get credit in the future.
The different types of BNPL
The steps we describe are common to all BNPL services. It’s good to know that there are quite a few available. Some online shops have their own scheme. Others use lenders like Klarna, Clearpay, PayPal Pay in 3 and Zilch.
While they all work in the same way, they can have different features. These features can make one BNPL option a better choice for you than another.
Features include:
How many payments you make
One big payment or more smaller ones. The number of smaller ones can vary between providers. Some lenders give you different options while others only offer one. So think about what will work best for you.
How long between payments
Even with the single payment option, there will be a gap between buying and paying. For multiple payments, these could be spread over weeks or months. Always check how much you’ll be paying and how often these payments will come around.
Fees for late payments
These can be a flat fee or a percentage of the total cost. There may be extra fees depending on how late the payment is. Some lenders set a limit on these charges.
Flexibility
What if you need a bit extra time to make one of your payments? Or you find that you can pay the whole amount sooner? Some lenders may be open to changes and make them easy. Others have stricter rules.
What to bear in mind
BNPL can be helpful, but it’s not for everyone. So how do you know if it’s right for you? Plus, you may have a choice of BNPL options. Which one should you pick?
The next chapter will help you work out the answers to these questions.
Is it right for you?
Chapter 3
How long it takes
3 minutes
What to consider
We’ve talked about the pros and cons of Buy Now Pay Later. You’ve also seen how it works. So maybe you're already starting to work out if it’s right for you. Here are some ideas to help you decide.
Think before you buy
BNPL can be a good way to manage your spending. Being able to spread the cost can make the difference between buying something and having to do without it. But this way of paying can also tempt you to buy more than you can really afford.
So ask yourself if you’d buy this item if you couldn’t use BNPL. Do you really need it?
Know your budget
Creating a budget helps you work out how much you have available to spend each month. So when you’re looking at BNPL repayment options, you’ll know if you can afford these – and exactly how much you can afford.
Already have a budget? If you start to use BNPL, don’t forget to add those repayments into your budget. This will help to keep you in control of your spending.
Want to work out your budget but not sure where to start? Our Create a budget lesson shows you how.
Do your research
This might start by you asking others about their experience with BNPL. How did they find it? Was there anything that they wish they’d known before they started using it? Check each BNPL service before you sign up to it. Is it one you know and trust?
Think about the features we mentioned earlier in the lesson – repayment frequency, fees and flexibility. How important are each of these to you? Asking this can help you pick the one that’s right for you.
Remember
Make sure you fully understand what you’re agreeing to when you use Buy Now Pay Later.
Give yourself time to think about how you’ll repay and if you can afford it.
Keep on top of your payments
BNPL often means making regular payments over a period of time. It can be a long-term commitment. So you’ll need a way to make sure you pay what you owe, when it’s due.
Some lenders take repayments automatically. This can make things easier, as it’s one less thing for you to remember. If that’s not the case, make a note or set a reminder to pay on time, each time. Some providers have an app or a website where you can keep track of your payments.
Be aware
If you’re paying for lots of different things with BNPL, it can be hard to remember how much you need to pay and when. Don’t overstretch yourself.
Check your budget to make sure you can afford it all. And make sure you keep track of when each of these payments is due, to avoid extra charges.
Top tips to keep you safe
However you decide to pay, you’ll want to keep yourself and your money safe. So we’ll end this lesson with some tips to help you do this.
Think about:
- The benefit of using BNPL to buy something, compared with other ways to pay for it.
- What your budget looks like – not just now but over the whole time you’ll be making your BNPL payments.
- Whether you’re thinking of using BNPL just to delay debt.
- Any fees or interest you may need to plan for.
- Any other options to help pay for the item that might work better for you.
Help when you need it
If you do start to struggle with your BNPL payments, you’re not alone. The best thing to do is get in touch with your lender as soon as you can. Explain your situation and ask if they can help you work things out.
There are other organisations who may be able help, too. For example, Citizens Advice, MoneyHelper and StepChange. They can give free advice or help you set up a payment plan that you can afford.
Want to learn more?
Borrow
Budget
Related lessons
Lloyds Bank Academy is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Lloyds Bank does not endorse the services they provide. The information in this module was last updated on 19th January 2026.