Have you ever needed something in the moment but didn’t have enough cash to buy it immediately? Did you know that you can pay for purchases like these with installments?
As a growing marketplace with many companies competing for everyone’s business, installments are a great alternative.
We want everyone to make the best decision possible when looking for ways to buy now and pay later. Let’s take a closer look at the concept of sites like Afterpay and introduce you to the best buy-now-pay-later solution!
Understanding the concept of buy-now-pay-later services
Buy-now-pay-later services are similar to loans from a bank, a business, or a person. With loans, a lender provides money to someone who must then pay that money back within a predetermined period of time.
Loans are often paid back in the form of regular installments, which are most often planned out monthly. The borrower is also charged interest on the money that they initially borrowed.
Buy-now-pay-later sites are growing rapidly in terms of popularity. They operate in a similar manner to loans from lenders except some come without the high-interest aspect. However, if you miss a payment or fail to pay your installments, then you will accrue additional charges.
The sign-up process generally starts with approval, which is required by the buy-now-pay-later company to ensure that the borrower is trustworthy and will pay them back, just like banks do prior to approving you for a mortgage, an auto loan, or a personal loan. This process is what’s known as a credit check.
The company offering the loan will only accept a debit card as a method of payment from the borrower once the approval has been granted. The customer can swipe their card at the desired store and boom! Just like that, you’ll pay later.
It is not like a credit card because your first payment might not be due until a month or so after the purchase is made. But let’s look more closely at credit checks because there are two different types and it’s important that you understand the difference.
What is a hard credit check?
When you apply for a loan, your credit report will be checked, meaning your credit score will be obtained and analyzed by the lender. A credit check can possibly leave a negative impact on your score depending on the information gathered and the intensity of the check. Hard credit checks are the type of credit check that lowers your credit score. They are conducted when you apply for new loans, apartment rental applications, and credit limit increases.
What is a soft credit check?
Soft credit checks will not be reflected on credit scores as it generally is not analyzed quite like a hard credit check. These kinds of credit checks should never impact a credit score. Soft credit checks are often used for pre-approvals and account reviews by current creditors.
What to look out for with buy-now-pay-later services
Make sure to check out which retailers the company is partnered with because some of these buy-now-pay-later services are only available at a minimal number of stores.
Be sure to understand the penalties if you happen to miss a payment, too. Many of these sites inflict major consequences if a payment is late or goes unpaid.
We hope this article helps choose the right buy now pay later app.
Frequently Asked Questions
How long do hard checks stay on your credit report?
Hard checks will stay on your credit report for two years before they disappear.
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Disclosures
Credit score improvement is not guaranteed. A soft credit pull will be conducted that has no impact to your credit score. Credit scores are independently determined by credit bureaus. Data was sourced from credit score data from over 147,500 Credit Builder Plus members with an active loan between January 1, 2020, and March 15, 2023. Credit score improvement is not guaranteed. Credit scores are independently determined by credit bureaus. MoneyLion is not a Credit Services Organization. Credit Builder Plus is an optional service offered by MoneyLion.
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Credit Builder Plus membership ($19.99/mo) unlocks eligibility for Credit Builder Plus loans and other exclusive services. This optional offer is not a Pathward product or service. A soft credit pull will be conducted which has no impact to your credit score. Credit Builder Plus loans have an annual percentage rate (APR) ranging from 5.99% APR to 29.99% APR, are made by either exempt or state-licensed subsidiaries of MoneyLion Inc., and require a loan payment in addition to the membership payment. The Credit Builder Plus loan may, at lender’s discretion, require a portion of the loan proceeds to be deposited into a reserve account maintained by ML Wealth LLC and held by Drivewealth LLC, member SIPC and FINRA. The funds in this account will be placed into money market and/or cash sweep vehicles, and may generate interest at prevailing market rates. You will not be able to access the portion of your loan proceeds held in the credit reserve account until you have paid off your loan. If you default on your loan, your credit reserve account may be liquidated by the lender to partially or fully satisfy your outstanding indebtedness. May not be available in all states. Credit Reserve Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Credit Reserve Account, see Investment Account FAQs and FORM ADV.
Instacash® is an optional service offered by MoneyLion. Your available Instacash Advance limit will be displayed to you in the MoneyLion mobile app and may change from time to time. Your limit will be based on your direct deposits, account transaction history, and other factors, as determined by MoneyLion. Expedited delivery requires Turbo Fee. See Instacash Terms and Conditions for more information and eligibility requirements.
Instacash is a 0% APR cash advance service provided by MoneyLion. Your available Instacash advance limit will be displayed to you in the MoneyLion mobile app and may change from time to time. Your limit will be based on your direct deposits, account transaction history, and other factors as determined by MoneyLion. This service has no mandatory fees. You may leave an optional tip and pay an optional Turbo Fee for expedited funds delivery. For a $40 Instacash advance with a Turbo Fee of $4.99, your repayment amount will be $44.99. Generally, your scheduled repayment date will be your next direct deposit date. An Instacash advance is a non-recourse product; you will not be eligible to request a new advance until your outstanding balance is paid. See Membership Agreement and help.moneylion.com for additional terms, conditions and eligibility requirements.