Buy Now Pay Later (BNPL) Glossary
Clear, plain-English definitions for terms related to modern short-term finance.
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Buy Now, Pay Later (BNPL)
A type of short-term financing that allows consumers to make purchases and pay for them over time, usually in interest-free instalments. Popular providers in the UK include Klarna, Clearpay, and Laybuy.
Continuous Payment Authority (CPA)
An agreement you make with a BNPL provider allowing them to automatically take payments from your debit or credit card on scheduled dates. Unlike a Direct Debit, it is linked to the card number, not the bank account.
Default
Failing to repay the BNPL debt as agreed. While many BNPL providers historically did not report to credit agencies, most major providers now report missed payments and defaults, which will severely damage your credit score.
Financial Conduct Authority (FCA)
The regulatory body for financial services in the UK. The government is in the process of bringing BNPL products fully under FCA regulation to provide consumers with better protection and access to the Financial Ombudsman.
Hard Credit Check
A full search of your credit report that leaves a visible footprint. While standard 'Pay in 3' BNPL products usually only use soft checks, longer-term BNPL financing options often require a hard check.
Late Fee
A penalty charge applied by the BNPL provider if you miss a scheduled payment. These fees vary by provider but are capped at a maximum amount. Repeated late fees can quickly make the 'interest-free' purchase very expensive.
Pay in 3 (or Pay in 4)
The most common BNPL structure. The total purchase price is divided into three or four equal instalments. The first is paid at checkout, with the remaining instalments taken automatically every two or four weeks.
Pay Later (e.g., Pay in 30 days)
A BNPL option where you pay nothing at checkout and have a set period (usually 30 days) to pay the full balance. Often used to try on clothes at home before paying for the items kept.
Point of Sale (POS) Finance
Credit offered directly at the checkout (either online or in-store) to finance that specific purchase. BNPL is a modern, digital form of POS finance.
Soft Credit Check
A preliminary check of your credit report used by most BNPL providers to assess your eligibility. It does not leave a visible footprint for other lenders to see and does not affect your credit score.
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