Does Buy Now, Pay Later Affect Credit? What You Need to Know About Short Term Loans

If you do any online shopping, you’ve probably seen a short term payment plan, or a “Buy Now, Pay Later” plan. Sometimes it will appear next to a sale price as a price-per-month option. Most times it pops up at checkout to offer another way to pay — in installments, over time.

If you guessed that these short term payment plans are a type of installment loan, you’d be right. These payment plans, also known as a point-of-sale credit, allow you to purchase an item without having to pay for it right away. When considering your financial wellness, it’s always smart to consider all your options.

Today, we’re taking a look at these short term “Buy Now, Pay Later” plans and how they compare to a personal loan.

The Pros and Cons of Buy Now, Pay Later

The Pros

  • No hard pull of your credit, which makes them an attractive option
  • Pay within the “delay period” to avoid fees of any kind
  • Similar to a short-term personal loan with no interest rates

The Cons

  • Some providers don’t report to credit bureaus, which is a missed opportunity for you to build credit through repayments
  • With inconsistent payments, your credit can be negatively affected
  • Late fees may be applied
  • The plan provider might ask for a settlement (read: more fees)
  • You could be stuck with a high interest rate as you pay down the loan

Personal Loans can be Short Term, too

If you’re making a big purchase, a short term personal loan is a great alternative to Buy Now, Pay Later plans. Our World Finance personal loans come with fixed, customizable terms which can range from 6 to 48 months. A personal loan can offer you that short repayment term as well as a fixed rate – which means there’s no risk of additional fees or varying rates. You also gain a strong opportunity to build and maintain credit with a personal loan, adding length to your credit history and a more diverse mix to your credit types.

As you’re shopping online this holiday season, both short term payment plans and personal loans can offer some relief to your budget. As you look into these or any financial product, give yourself the gift of peace of mind by considering your options and doing what’s best for you and your overall financial wellness.

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