What Are The Best Buy Now Pay Later Apps

“Buy now pay later” for online shopping is transforming the way Canadians used to purchase merchandise. If you're new to this type of payment option, you may have some questions regarding how things work, what the best BNPL companies are, and the possible drawbacks you can experience. To make sure you're informed before opting in during your online checkout process, browse through our need-to-know guide below.

What is buy now pay later?

Think of buy now pay later as a type of instant money loan where you can get a cash advance to pay for your online purchases. With this payment option, rather than paying the total amount of purchase the day you checkout, you're able to make instalments over the course of a payment plan you agree to with the buy now pay later provider interest-free. Typically, your split payments will be due every two weeks or monthly, depending on the total cost of your purchase.

How does buy now pay later work?

To know how buy now pay later works, let's use an example of how your instalment payment plan could work:

Let's say you need to purchase a new laptop for school and decide on one that costs a total of $1350. According to the repayment terms you agreed to with your BNPL company, you'll need to make four interest-free instalments each month until the entire $1350 is paid off.

As a form of down payment, you'll need to pay $337.50 today. Then, one month after your first payment, you'll own another $337.50 and so forth until the payment plan has come to an end.

How to sign up for BNPL services

To access buy now pay later services, follow these steps after adding the things you want to buy to your online shopping cart:

1. Checkout online

To start the process, select "Proceed to checkout." After doing this, a new browser window will open and ask for your full name, phone number, billing and shipping address, email address, and other personal data.

2. Choose buy now pay later

After you submit your details, a list of the payment methods that the store accepts will appear. Click on the hyperlink to be taken to the provider's third-party website. If you buy now, pay later is available for your purchase.

3. Undergo a soft credit check

Now, you will be asked to fill out an application and agree to a soft credit check, which looks at your credit score to see if you qualify for the buy now, pay later option.

4. Accept the terms and conditions

If you meet the requirements, your screen will display the conditions of your repayment plan, along with any fees associated with late or missed payments. Also included will be a schedule of when your recurring instalments are due. Luckily, you won't need to submit another application after you've been approved.

5. Pay equal monthly payments

Now, you can go ahead with your weekly or monthly instalments. It's that easy.

Best BNPL companies in Canada

While there are numerous buy now pay later apps available in Canada, we've narrowed it down to the top 7 best buy now pay later providers. Here's everything you need to know about each:

1. KOHO

Canadians can easily manage their monthly budget and expedite their checkout experience with KOHO's buy now pay later option. With KOHO, you can choose from previous purchases of up to $1,000. Then, you can decide whether you want to pay biweekly or monthly. Once you've determined a timetable that works for you, KOHO will deal with all the details, ensuring that you grasp the terms and conditions of your billing schedule, which you can effortlessly manage using your KOHO mobile app!

Pros

• No interest payments with options to repay your purchases over 3, 6, and 9 months, depending on your needs.

• Choose up to $1000 worth of past payments to split into smaller, more manageable ones.

• Track your repayments conveniently on your KOHO app.

• No credit check upon approval.

Cons

• Non-payments may be reported to credit bureaus.

• A cap of $1000 worth of purchases.

• No late fees are applied to user accounts.

• Can only be applied to past purchases you've made.

2. Affirm

Founded in 2012, Affirm is one of the original buy now pay later service providers. Today, the app is supported by over 100,000 in-person and online stores in North America. With an instant approval process and interest-free payment options for purchases of as little as $50, Affirm also offers four recurring invoice payments and larger loan options to customers. But there's a catch: you could face up to a 36% APR depending on your creditworthiness if you choose monthly repayment terms instead of bi-weekly for larger purchases.

Pros

• No late fees, annual fees, prepayment fees, or fees to open/close your Affirm account.

• Pay four equal instalments every two weeks with no interest charges.

• Options to repay large purchases over four years.

• A soft credit check is performed during the approval process, so it won't hurt your credit score.

Cons

• While Affirm charges no fees, it will report non or missed payments to the bureaus, which will be reflected on your credit report, potentially hurting your credit score.

• No interest is only offered to those willing to pay bi-weekly.

• High interest rates for higher purchases and month-to-month payments.

• Affirm pay in 4 will not help you build credit.

3. AfterPay

Next up, we have AfterPay, which can be used for online and in-store purchases. Similar to Affirm, AfterPay offers a zero-interest payment option to users who opt for their 6-week instalment plan. There are month-to-month instalment options for larger purchases over $400. A notable feature of AfterPay is that it offers a reward program on the app when customers pay off their instalment plan. Currently, there are no subscription fees to use AfterPay. However, if you miss a payment, you will be charged a late fee of up to $8.

Pros

• Four interest-free instalments within 6 weeks, which are paid bi-weekly.

• Available in-store and online, offering convenience to shoppers who like both shopping options.

• The soft credit check will not impact your credit score.

• Earn rewards on the app when you pay off all instalments.

Cons

• Interest rates for those who pay monthly are between 7% and 36%.

• Late payment fees up to $8.

• Timely payments are not sent to bureaus, only non-payments, so it will not help you build credit.

4. Klarna

Klarna is one of the top buy now pay later apps for those who value flexibility when it comes to their payment options. With a pay-in-four plan, a pay-in-30 plan and monthly financing options, customers can choose which plan fits their current cash flow and budget. Again, if you choose to pay monthly, you will be charged interest. Klarna is currently accepted at more than 400,000 global retailers, including big names like Sephora and Nike. But, there are associated fees when using this buy now pay later app, including late fees of up to $7, possible service charges when using Klarna at non-partnered retailers, and rescheduling fees if you can make your payments on time.

Pros

• No price maximum for payments, which gives users more purchase power to buy high-ticket items.

• Three separate payment plans, two of which have no interest attached.

• Customers have the option to defer one of their payments for up to 30 days.

• A soft credit check is used, so it will not lower your credit score.

Cons

• Late payment fee up to $7.

• Potential rescheduling fees and fees if you use Klarna at a non-partnered retailer.

• Interest rates up to 34% when opting for a monthly instalment payment plan.

• Non-payments are sent to credit bureaus, which can hurt your credit score.

5. PayBright

PayBright is a buy now pay later app partnered with over 7000 retailers and is owned by Affirm. Similar to other providers, users have the option of zero-interest instalments for bi-weekly payments and monthly plans with interest up to 21.95% APR, depending on creditworthiness. Compared to other BNPL companies, PayBright has the highest acceptance rates, making it easier for those with lower credit scores to access their services. Currently, users must make a minimum $50 payment to qualify for instalments.

Pros

• No interest is charged on bi-weekly instalment payments.

• Highest user acceptance rates among buy now pay later providers.

• No fees for early repayments.

Cons

• A hard credit check is performed if you opt for monthly instalments, which will lower your credit score.

• Users report recurring technical issues when using the app.

• You must be 18 years old to use the app.

• You must have a Canadian credit file to qualify.

6. Sezzle

Sezzle is a buy now pay later app available to users with minimum purchase requirements of as little as $10. Instalments can be broken up into four equal payments due within 6 weeks with zero interest, two payments over two weeks, or monthly with interest charged. If you've purchased a higher-ticket item and need more time to pay it back over a longer period, you can do so for up to 48 months. Sezzle charges several fees, including ones for rescheduling your payments, late payments, failed payments, and using a debit or credit card.

Pros

• Three separate payment options, two of which have no interest charged.

• Longer repayment terms for bigger purchases.

• A soft credit check is performed, so it will not hurt your credit score.

Cons

• Late fees are charged up to $15, rescheduling fees up to $7, failed payment fees up to $5, and a convenience fee up to $3.

• A subscription fee may be charged to shop at larger-name retailers.

• 5.99%-34.99% APR charged for monthly financing.

• A 25% down payment is required during the checkout process.

7. PayPal

Lastly, PayPal offers users the convenience of splitting payments between $30 and $1500 to make purchases more affordable. There's no interest charged with the Pay in 4 plan, which requires users to pay four equal instalments over 6 weeks. Users also have the option of 6-month, 12-month, and 24-month repayment lengths for larger purchases over $200, with fixed interest rates ranging between 9.99% and 35.99% APR. Another notable feature of PayPal is that it offers a layer of protection against credit and fraud risks for added peace of mind.

Pros

• Soft credit check that won't hurt your credit score.

• No late payment fees are charged to user accounts.

• Accepted by millions of merchants worldwide, offering users more purchase power.

• Convenient repayment terms, depending on the size of your purchase.

• Added protection against credit card fraud.

Cons

• PayPal Pay in 4 is not available for in-store purchases.

• Purchase maximums are capped at $1500.

How to compare and choose the right buy now pay later business

If, by chance, there are several BNPL payment options offered at checkout, you may be wondering which one to choose for your upcoming digital payments. Here are some factors you need to take into account to ensure you choose the best one:

• In-store and online availability: If you're someone who likes to shop online and in person, double-check to see if the options available accept payments at both. Also, confirm that the stores you shop at accept these types of flexible repayment options.

• Fees: Take a look at all the potential fees you may be subject to. This includes late payment fees and potential subscription fees when shopping with certain online merchants.

• Report to credit bureaus: You'll also need to confirm whether the BNPL provider reports missed and non-payments to credit bureaus, as it can negatively impact your credit score. Some providers also report on-time payments, which could benefit you and your credit score.

• Repayment terms: Most buy now pay later companies offer more than one option for customer payments. Check out the terms and choose one that fits your needs. For example, you may be able to pay monthly, bi-weekly, or weekly.

• Spending limit: Double-check and confirm whether there is a spending limit on purchases you are allowed to make using each buy now pay later app. Some may be more suited to your needs than others.

• Interest rates: For larger loan requests, you may have to pay interest. So compare the interest rates presented by the buy now pay later app, personal loans, credit lines, and other financing options.

• Returned items: Lastly, confirm whether returns are allowed, whether fees apply, and how long the refund process will take.

What are the benefits of buy now pay later?

There are numerous reasons why more Canadians are choosing a buy now pay later payment option rather than making the entire payment upfront. If you're still skeptical or on the fence about whether you want to try this the next time you're shopping at an online store, take a look at these benefits below:

Get approved in seconds

Unlike credit cards and personal loans, buy now pay later doesn't require lengthy credit checks that could take days to complete. When you choose a buy now pay later payment plan, you'll get approved within seconds, making the entire process easy and convenient no matter what you're buying. And remember, once approved by a specific BNPL company, you don't need to go through it each time you check out in the future.

No hard credit inquiry

Buy now pay later also doesn't require a hard credit inquiry, which means you won't take a credit hit when the business runs your credit history. If you were to apply for a new credit card, personal loan, or credit line from a traditional lender, you'd likely undergo a hard credit check, which would impact your score and be listed on your credit history.

Interest-free installments

Credit cards charge interest when you charge monthly payments to your card. This means you'll pay more on top of what your original purchase price was. And given that credit cards have high interest rates, this can become overwhelming without the right plans for spending and saving in place.

With buy now pay later, your monthly payments are interest-free, and the only way you'll have to pay is if you miss your instalments.

Flexible payment plans

Buy now pay later also offers flexible payment options for customers paying online. So, whether you want to make equal instalments bi-weekly, monthly, for 3 months, 6 months, or over the next year, BNPL companies typically offer you the option to do so.

Buy the things you want

BNPL enables you to make purchases without bearing the initial burden on your bank account, regardless of whether you're short on cash for the month or like the idea of breaking up your bigger purchase into equal instalments through a payment plan.

Are there potential downsides to buy now pay later?

Yes, buy now pay later's flexible payment options offer numerous benefits and convenience to online shoppers. However, there are still some potential drawbacks you need to be aware of before applying:

Late payment fees

Keep in mind that because you get a cash advance for your items at checkout, buy now, and pay later, installment agreements are still technically a form of loan. This means your monthly payments are subject to terms and conditions that you need to fully understand, especially when it comes to late fees and whether you'll incur interest charges on any late or missed payments.

Could impact your credit score

An essential component that factors into your overall credit score is your ability to make your monthly payments on any debts you have. Over time, each on-time payment can help increase your score, while late payments can lower your credit score.

If, for some reason, you are unable to make your equal monthly instalments during your entire payment journey, the buy now pay later has the right to send your non-payment information to credit bureaus. When this happens, the inability to pay will be recorded on your credit report and impact your credit history.

Not entirely sure what your credit score is? Get a free credit score check with KOHO!

May lead to overspending

Buy now pay later services have the potential to incite excessive spending, which, if not managed, can lead to a domino effect of debt accumulation. It can be challenging and emotionally upsetting to pay off debt, especially large amounts of debt. Before you buy and before using this service, think about whether the item you want is worth it and whether you would buy it if you had the money in your account to pay for the item upfront.

Can't use a prepaid card

Because prepaid cards may not hold a balance on them at the time of your next instalment payment, you aren't able to use your virtual card for online shopping with buy now pay later. Instead, you'll need to use a credit or debit card that's linked directly to your bank account.

Do you need a good credit score to be approved for buy now pay later?

The provider you are applying with will determine whether or not you are authorized for buy now pay later services. Your eligibility may differ across providers because each one has a different minimum score standard. Because these businesses only run a soft credit check on your history, there's no harm in applying to see whether you're accepted or not, given that it's not going to impact your credit score further.

And as we mentioned earlier, you only need to apply for the service once. Once you're accepted, you won't have to go through the application process again for future purchases.

Which buy now pay later app has the highest acceptance rates?

Out of all the buy now pay later apps we reviewed in this post, the easiest apps to be accepted on are KOHO and PayBright. Remember, acceptance rates can vary among platforms depending on your creditworthiness and the total cost of your purchase, with expensive purchases having more stringent approval rates than more affordable ones.

Luckily, most buy now pay later apps to run soft credit score checks. So, there's no harm in applying to different ones offered by your retailer, as it shouldn't impact your credit score.

Can I fully pay off my online payments before the end of my repayment plan?

Because your payments are interest-free, you should be able to pay them off completely before the end of your payback term without incurring any costs. But, there is still the risk that paying off the debt early will result in fees.

We suggest that you check the terms and conditions offered to you at checkout to determine whether or not any fees will be charged to your account if you want to pay off the money sooner than the schedule offered to you.

Are there alternatives to buy now pay later?

Look, buy now, pay later isn't for everyone. So, what alternatives are out there? Here are some options for you:

1. Personal loan: For larger purchases, you may want to consider applying for a personal loan through your bank or credit union. Personal loans are quite flexible in terms of their repayment schedule and their credit score requirements, making them more accessible for those of you who may have a lower score.

2. 0% APR credit card: 0% interest rates on certain credit cards are often available with certain companies as a promotional offer that can last up to 2 years. That said, they usually require a certain credit score upon approval.

The bottom line

For individuals who practice good money management, buy now pay later is an excellent approach to spread out monthly spending on everyday items. However, there is still the chance of getting carried away with your purchases, that could lead to a cycle of debt quickly.

If you're still unsure whether buy now pay later is right for you, remember that there are other financial protection alternatives available like 0% interest credit cards for those with good credit and personal loans. Luckily, KOHO offers several thoughtfully tailored financial products for Canadians of all different financial backgrounds, whether you want to build your credit with KOHO by opening a virtual credit card that offers overdraft protection coverage or make a return on the money you're putting away for the future without a high-interest spending account, know that KOHO has a solution for you.