Klarna, Clearpay, PayPal credit - these are all examples of 'buy now, pay later' schemes. But what are the factors to consider?

You've found the perfect pair of trainers online, but there's only one pair in your size left. Even worse - it's the week before payday and your bank balance is looking woeful. Suddenly, you spot an option to 'pay later'. It sounds tempting. What do you do?

'Buy now, pay later' credit is the latest payment trend to sweep the nation, allowing people to spread the cost of their online purchases. Companies such as PayPal Credit, Klarna and Clearpay are making it easy to buy now and pay later at a huge range of fashion, furniture and electrical retailers.

But, as the saying goes, there's no such thing as a free lunch. Here, we explore the advantages and drawbacks of the popular payment trend to help you make an informed decision.

Is it like Klarna?

In 2018, the answer was "Sort of." In 2026, the answer is "They are becoming much more similar due to regulation."

2018 View: Klarna was seen as a "light" budgeting tool (often no credit impact), while PayPal Credit was a formal "virtual credit card" (hard search).

2026 Reality: As of July 15, 2026, new FCA rules mean all BNPL providers (including Klarna's "Pay in 3") must perform formal affordability checks and offer Section 75-style protections, making the "feel" of the products very similar to traditional credit.

So, how does it work?

'Buy now, pay later' schemes allow you to buy something now without paying anything, and then pay for it at a later date. Not all schemes are the same - some give you 30 days to pay, while others could give you up to 12 months.

PayPal Credit

PayPal Credit gives you a

credit limit

attached to your PayPal account and may offer promotional 0%‑interest periods for certain purchases, but the exact amount and length of the offer depend on the current terms. If you do not pay within the promotional period, you'll be charged interest at the standard representative

APR

, which is currently 23.9% p.a. variable, and you'll need to pay at least the minimum balance on your statement each month. The 0% for 4 months on purchases over £99 still exists, but the "safety net" cost is higher.

Klarna 'Pay Later'

Klarna 'Pay Later' allows you to pay in full up to 30 days later (called 'Pay Later in 30 days') or in three interest‑free monthly instalments (commonly branded as 'Pay in 3').

If you're shopping online, simply order your goods as usual (up to the value of your credit limit) but select 'Klarna' as the payment method at the checkout. You then get 30 days to pay in full or you can repay it in installments, giving you time to try out your order before you pay for it. For many of us, this removes one of the biggest problems with online shopping - waiting for your returns to be refunded!

Klarna 'Financing'

Klarna's 'Financing' option allows you to spread the cost of pricier items into equal monthly payments. Importantly, you'll pay interest on this borrowing, with the APR for longer-term financing now reaching up to significantly higher interest rates than previously, depending on the plan and retailer. The exact amount of interest you'll be charged will depend on the retailer, so it's worth checking direct with the retailer what your interest rates will be. You can choose payment plans of 6-36 months.

Klarna vs PayPal Credit vs Clearpay: at a glance

With several providers offering different terms, it helps to see them side by side. The table below summarises the key differences so you can compare at a glance.

Keep in mind that exact terms can vary by retailer and may change, so always read the provider's conditions at checkout before committing.

How does 'buy now, pay in 30 days' work?

If you've seen the option to 'buy now, pay in 30 days' at the checkout, it means exactly what it sounds like: you receive your goods straight away but have a 30-day window to pay the full amount - with no interest charged during that period. Unlike instalment plans that split the cost into several monthly payments, a 30-day model asks for one lump-sum payment before the deadline. Think of it as an interest-free, short-term loan from the provider to you.

Which UK providers offer a 30-day window?

Klarna's 'Pay Later in 30 days' is the most widely available 30-day option in the UK, accepted at hundreds of online retailers ranging from fashion to electronics. Clearpay works on a slightly different model - splitting the cost into four fortnightly payments rather than a single 30-day window - but it is often grouped under the same umbrella because the first payment is taken at the point of sale and the balance is cleared within roughly six weeks. Always check the specific terms at checkout, because the repayment structure can vary by retailer.

What happens on day 31 if you haven't paid?

If you miss the 30-day deadline with Klarna, the provider may hand the debt to a collection agency, and you could face late-payment fees. More importantly, the missed payment is now reported to credit reference agencies, which means your credit score could take a hit. Even a single missed BNPL payment can remain on your credit report for up to six years from the date it was recorded, making it harder to borrow in the future.

How the 2026 FCA rules change the 30-day model

From 15 July 2026, new FCA regulations require all BNPL providers - including those offering interest-free 30-day credit - to carry out formal affordability checks before approving you. Providers must also report your account activity to credit reference agencies, so on-time payments can help build your credit history, while missed ones will cause damage. In addition, you'll gain Section 75-style protections, giving you the right to claim against the BNPL provider if goods are faulty or never arrive. These changes mean that 'buy now, pay in 30 days' now operates much more like a traditional credit product, so it's worth treating it with the same level of care.

Be wary of missed and late payments

'Buy now, pay later' can work well if you need something urgently but don't have the cash to hand, as long as you're confident you can make your repayments on time.

Klarna will send you an email telling you when and how to pay, as well as text reminders when your payment is due. PayPal also sends you monthly reminders of when your payment is due, and you can set up a direct debit with them if you'd rather be safe.

The trouble starts if you miss a payment, or don't have enough money in your account for the payment to be taken.

When this happens with Klarna's 'Financing' option, any promotional interest rates will be cancelled, and you'll start being charged interest on repayments. You'll be charged interest at the applicable representative APR, which may be up to 21.9% or higher depending on your plan and the retailer, which means your purchase could turn out to be a lot pricier than you first thought.

If you use financing and forget your payment date and make a payment late, you could also be charged a fee. Likewise, PayPal may charge you a fee if you make a late payment or if your payment is returned because you don't have enough money in your account, in line with their current UK‑facing terms.

If you've ordered something and are worried about missing your payment, get in touch with Klarna's customer service team or PayPal's customer service using the contact details shown on their official UK‑facing website.

When buy now, pay later makes sense - and when it doesn't

BNPL can be a genuinely useful tool in some circumstances, but it can also lead to financial trouble if used carelessly. Below is a quick checklist of factors to consider when weighing up whether it fits your situation.

Situations where some consumers use BNPL

• Try before you buy: If you're ordering multiple sizes or styles online and plan to return what doesn't fit, a 30-day pay-later window means you won't be out of pocket while you wait for refunds.

• Planned purchase close to payday: If you know the money is coming in within a few days and simply need to bridge a short gap, an interest-free BNPL option can be used instead of dipping into an overdraft or paying credit-card interest.

• 0% promotional window on a big-ticket item: For larger purchases such as furniture or electronics, a 0% financing plan lets you spread the cost without paying interest - as long as you clear the balance before the promotional period ends.

• Building a positive credit history: Under the new FCA rules, on-time BNPL payments are reported to credit reference agencies, so responsible use can contribute to a healthier credit score over time.

When BNPL carries greater risk

• Impulse spending: If the only reason you're buying is because BNPL makes the checkout feel painless, that's a red flag. The cost doesn't disappear - it just arrives later.

• You're already carrying other debt: Adding a BNPL commitment on top of existing credit-card balances, loans, or overdrafts increases the risk of falling behind on one or more repayments.

• Uncertain income: If your earnings fluctuate - for instance, through freelance or zero-hours work - committing to fixed repayment dates can be risky. A single missed payment now affects your credit report.

• Stacking multiple BNPL commitments: Juggling repayments across Klarna, PayPal Credit, and Clearpay at the same time makes it easy to lose track. Each provider reports independently to CRAs, so one slip can have a knock-on effect across your credit profile.

• Spending beyond your means: A common rule of thumb - if you wouldn't hand over the full amount today, paying later doesn't change the fact that the money may not be affordable.

Credit Score Impact (Significant Change)

Klarna now affects your credit score

The Correction: Klarna now reports both on-time and missed payments for "Pay in 3" and "Pay in 30 days" to major UK credit reference agencies. Using Klarna now leaves a footprint that other lenders (like mortgage providers) can see, just like PayPal Credit.

When you choose the 'Pay Later' options with Klarna, they'll run a credit check against your credit report, which may be a hard search visible to other lenders. A hard search may cause a small, temporary dip in your credit score and will be visible to other lenders on your report.

However, unlike the previous situation where missing a payment for the 'Pay Later' option typically wouldn't hurt your credit score, Klarna now reports these payments to credit reference agencies (CRAs). That means customers' credit scores are now directly impacted by using their 'Pay Later' products, including if they fail to pay on time.

Klarna 'Financing' and PayPal Credit could affect your credit score and report

When you apply for 'Financing' with Klarna, they'll run a hard search against your report. This will show up on your report (to both you and anyone who looks at your report) and may cause a temporary dip in your credit score.

Applying for PayPal Credit will also result in a hard search against your report. Unfortunately, PayPal gives no indication as to whether you'll be accepted before you apply, but the good news is they'll only run a credit check against you the first time you apply.

Don't forget that that too many credit applications in a short space of time may bring your score down.

If you miss a payment while on Klarna's 'Financing' plan, this is likely to harm your credit score, because these payments are reported to credit reference agencies and arrears can be recorded on your file. Similarly, missing a payment for PayPal Credit will have the same effect.

Remember that missed payments and arrears can stay on your credit report for up to six years from the date of default or first missed payment, and they signal to lenders that you may have struggled financially. So not only could your credit score take a hit, but credit providers might be more hesitant to lend to you in the future.

Not everyone is accepted

One of the downsides of choosing to buy now and pay later is that you might not even be able to. The nature of the service - taking on the retailer's risk by letting you pay later - means that credit companies will only let you pay later if they think you're a reliable borrower. Lenders consider multiple factors beyond just your credit score, including your income, existing borrowing, and whether repayments are affordable. Lenders consider multiple factors beyond just your credit score, including your income, existing borrowing, and whether repayments are affordable.

PayPal carries out creditworthiness and affordability checks when you apply for credit, looking at information held on you by credit reference agencies (such as your credit score and report). Before you apply, you'll need to meet the eligibility criteria set by PayPal. If you're declined, you'll receive an email explaining why. You'll be able to try again in the future, but not for at least 35 days after your first application.

Klarna asks for very little information upfront. Their model then looks at 140 different factors, including your geographical location, IP number, machine ID, and time of purchase. If the model flags you as a risky customer, you won't be eligible to use Klarna and will have to pay upfront. (There are, however, a few things you can do to increase your chances of being able to pay later.)

What are the alternatives to 'buy now, pay later'?

If you're looking to spread the cost of your online shopping, a credit card is one possible alternative. You'll get the convenience of being able to shop anywhere, and With a 0% interest purchase card, you may be able to pay no interest for up to two years or more, depending on the card, as long as you pay off the balance before the 0% interest period ends. Bear in mind that eligibility depends on a credit check, interest applies once any 0% period ends, and missed payments can harm your credit score.

Plus, with a credit card, making payments on time may help improve your credit score. Not to mention that they come with Section 75 protection under the Consumer Credit Act 1974, which means if your goods cost between £100 and £30,000 and are not delivered, are faulty, or the supplier goes bust, you may be able to claim against the card provider.

With ClearScore (a credit broker, not a lender), you can check your eligibility for a credit card before you apply - terms apply. Compare credit cards for free today.

Written by Frankie Jones

Copywriter

Frankie takes the often confusing world of finance and makes it clear and simple, to help you get your money sorted.

Frequently asked questions about buy now, pay later

Can I use buy now, pay later if I have a lower credit scores score?

It depends on the provider and the product. Klarna's 'Pay Later in 30 days' historically had a more lenient approval process, but under the 2026 FCA regulations all BNPL providers must carry out formal affordability checks. A credit score in the 'Let's start climbing' (0-409) or 'Moving on up' (410-519) range doesn't automatically disqualify you, but it does reduce your chances of being approved - particularly for higher-value orders or longer financing plans. If you're declined, it's worth checking your credit report for errors and working on improving your score before reapplying.

What happens if I return an item bought with BNPL?

When you return an item, the retailer processes the refund and notifies the BNPL provider. With Klarna, any outstanding balance linked to the returned item is usually cancelled or adjusted once the retailer confirms the return. With PayPal Credit, the refunded amount is credited back to your PayPal Credit balance. Clearpay similarly pauses or cancels upcoming instalments once the return is processed. In all cases, there can be a delay of several working days between the retailer accepting the return and the adjustment appearing on your account, so keep an eye on your statements.

Does buy now, pay later show on a mortgage application?

Yes. Since BNPL providers now report account activity to credit reference agencies, mortgage lenders can see your BNPL commitments when they review your credit file. Outstanding BNPL balances count towards your total debt, and any missed payments will appear as black marks. Some mortgage lenders view frequent BNPL use as a sign of financial strain, which could affect the amount they're willing to lend or the rate they offer. If you're planning to apply for a mortgage, it's sensible to clear existing BNPL balances first and avoid taking on new ones in the months leading up to your application.

Can I use more than one BNPL provider at the same time?

There's nothing stopping you from having active accounts with Klarna, PayPal Credit, and Clearpay simultaneously. However, stacking multiple BNPL commitments increases the risk of missed payments and makes it harder to keep track of what you owe and when. Each provider will now report to credit reference agencies independently, so missed payments with any one of them could damage your credit score. Before taking on a new BNPL agreement, add up all your existing repayment obligations to make sure the total is comfortably within your budget.

Is buy now, pay later regulated in the UK?

Yes. From 15 July 2026, all BNPL products fall under full FCA regulation. This means providers must be authorised by the Financial Conduct Authority, carry out affordability assessments, report to credit reference agencies, and offer consumers Section 75-style protections for purchases. If something goes wrong - for example, goods are faulty or never arrive - you now have the right to raise a claim directly with the BNPL provider, just as you would with a credit card company. These changes bring BNPL in line with other forms of consumer credit and give shoppers significantly stronger safeguards than were available previously.