Layaway is a thing of the past at many large retailers, but a new payment option is growing in popularity.
It’s called a Point-of-Sale loan.
It used to be popular for big-ticket items, but it is now being used to finance purchases of lower cost things like clothes, shoes and makeup.
You can choose to “Buy Now, Pay Later” online and at thousands of stores.
Typically, this option to finance your purchase pops up during checkout. To apply, you must input some basic information and often lenders will do a soft check of your credit.
If approved, you get the option to break the bigger total up into smaller payments. The first payment is due at checkout.
Some shoppers can qualify for a zero percent APR.
“How often do you come across a no interest loan. Credit cards don’t usually have that type of option, not your regular credit cards anyway,” Annie Millerbernd said.
Millerbernd is a Personal Loans Writer with NerdWallet.
She says you should keep in mind that each lender is different. One may not charge interest but another could.
“Though typically you will get an interest free offer, some ‘buy now, pay later’ point of sale financing companies will charge an APR of up to about 30 percent which is a lot of money to pay for something like a pair of shoes,” Annie Millerbernd said.
Other things to consider before opting in is whether a missed payment could impact your credit score, how returning the item impacts the loans, and if you can afford the item in the first place.
“That’s the biggest risk, that you will spend more than it is intended, or you will spend money when you originally didn’t intend to,” Annie Millerbernd said.
“If you can’t afford it, don’t buy it. But if you have to, make sure you can manage it,” Financial Planner Edward R. Williams said.
Williams suggests holiday shoppers make a budget to avoid starting the New Year in Debt.
“Let’s start the New Year in the fourth quarter and figure out what your goals are for that next year, figure out where you currently stand,” Williams said.