EMZETT.Instalment purchase and “buy now, pay later”
In short: Services where you receive goods immediately and pay later or in instalments; this feels cheap but can lead to debt.
In more detail: Online checkout often offers “Pay later”, “In 3 instalments” or “On invoice”, for example through Klarna, PayPal or retailers’ instalment plans. The providers check creditworthiness beforehand. For short payment terms without interest this can be handy; with long instalment plans interest arises.
In Depth
Forms
- Purchase on invoice: payment after receipt within about 14 days, usually without costs.
- Instalment payment: the price is spread over months. Depending on the provider 0 % financing or with interest.
- Buy now, pay later (BNPL): short-term payment deferral or split into a few parts, often directly in checkout.
- Instalment loan: a loan through a bank for larger purchases.
The risks
Whoever defers several purchases in parallel loses track. With missed payments reminder fees and default interest arise, and the entry can worsen the score at credit agencies. High effective annual interest rates are often hidden in instalments. The feeling “it costs nothing now” tempts to purchases one could not otherwise afford.
What to check
State the effective annual rate and the total costs (not only the instalment). Consumer loans must be explained clearly beforehand, and there is a 14-day right of withdrawal also for the loan contract. Loan contracts with minors need the parents’ consent; in practice they are not intended.
Rules of thumb
- Only buy what you could also pay immediately, and do not use BNPL to stretch your money.
- Record all open instalments and due dates in the household budget.
- Pay the invoice only after checking the goods and exercise rights (withdrawal, warranty) before the deadline expires.
- In case of payment difficulties talk early with the provider and use free debt counselling.
See also: Default interest and reminders, SCHUFA and creditworthiness, Household budget, Online banking and paying online