Point-of-Sale Installment Loans and Your Credit

You may have seen a ‘Buy Now Pay Later’ option at checkout at your favorite online store. Buy Now Pay Later is a type of point-of-sale (POS) installment loan. Over the past few years, POS installment loans have become a popular way to pay. In fact, they’ve been used by as many as 100 million Americans at least once in the past year, according to 2022 TransUnion Consumer Pulse research.

POS installment loans can be appealing because a large purchase doesn’t have to be paid in full upfront. In the Q3 2022 TransUnion Consumer Pulse, more than a fourth (28%) of consumers say they use Buy Now Pay Later services to spread payments out over time.

Whether you’ve taken out a POS installment loan before or are considering trying one for the first time, it’s a good idea to understand how they work. Here’s a description of what POS installment loans are and tips to manage them responsibly:

What are POS installment loans?

POS installment loans are loans provided at checkout for retail transactions for the purpose of financing a one-time, unsecured transaction. They allow you to finance a purchase with multiple, equal payments instead of one lump sum.

POS installment loan tips

If there’s a product you want, but find it would be easier financially to spread the payments out, POS installment loans can be an attractive way to pay. But before you buy, it’s a good idea to learn more about how these programs work.

Here are some things to keep in mind before using a POS installment loan such as Buy Now Pay Later:

Understand payment options and terms

You may be offered multiple POS installment loan options and terms for your purchase. Several lenders feature the ability to split your cost into four payments due every two weeks. If you make all the payments on time and in full, you may not pay any fees or interest. Some companies also offer longer-term loans, which can range from 3 – 36 months. Depending on the service you use, these loans may include interest charges in addition to the purchase price.

Check for any fees or penalties

Before making your purchase, you’ll want to understand if there are any other fees you may run into. Know if your lender charges late payment fees. You’ll also want to see if there are penalties for missing a payment or failing to pay completely. Some POS installment loan lenders may send the unpaid debt to collections. Collections can have a significant impact on your credit health.

Keep your budget in mind

If you decide to use a POS installment loan to finance your next purchase, it’s worth taking a few moments to fully understand the terms and conditions, as discussed above. Of course, it’s always important to be mindful of your budget and long-term financial goals. Breaking a lump sum into frequent, smaller payments may make certain purchases seem more affordable. Just be careful to not fall into the trap of overspending. When used responsibly, these loans can be another tool to help you achieve your financial goals.


Disclaimer: The information posted to this blog was accurate at the time it was initially published. We do not guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. This site is governed by the TransUnion Interactive privacy policy located here.

What You Need to Know:

The credit scores provided are based on the VantageScore® 3.0 model. Lenders use a variety of credit scores and are likely to use a credit score different from VantageScore® 3.0 to assess your creditworthiness.

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