Afterpay personal loan review: Loans to buy now, pay later

Pros

• Avoid interest chargesnSplit purchases into four equal installment payments over six weeksnNo fees unless you have a late or missed payment

Cons

• Late payment feesnLoan approval isn’t guaranteed at purchase time

Cons

What you need to know about an Afterpay personal loan

Afterpay is a buy-now, pay-later (or BNPL) service that lets people make a purchase at participating in-person and online retailers and pay them off in four installments over six weeks. You’ll need to select Afterpay as your payment method when you check out to see if you qualify.

We’ll break down how Afterpay works and what you need to know before you apply.

How Afterpay works

Afterpay may allow you to divide up the cost of your purchase and pay it off in multiple smaller payments with no interest charges. If you can make all your payments on time, you won’t have to pay any fees to use this service. But if you don’t make payments on time, you’ll get charged late fees.

Afterpay may perform a soft credit check when you sign up to use the service. The company also may approve you for larger amounts if you’ve paid off previous purchases with Afterpay.

You can use Afterpay to split a purchase into four payments, which you can pay off over the course of six weeks. You usually have to make your first “installment” payment at the time of purchase.

Late payment fees

If you’re unable to make a payment on time, you’ll be charged late fees of up to 25% of the purchase price. Your payment is considered late if you don’t make one of the installment payments within a 10-day grace period after the due date.

Credit or debit card required

You’ll have to associate a credit or debit card with your Afterpay account and make sure you have enough credit or funds to make installment payments on the dates specified in your payment schedule.

Remember that while Afterpay says it doesn’t charge you interest — if you use a credit card to make your Afterpay payments, that card may have interest charges, unless you’re careful to pay off the card’s balance in full before interest accrues.

A closer look at an Afterpay personal loan  

• Afterpay has an app and a “card” — You can download the Afterpay app to use for online shopping or get an associated digital “card” for in-person purchases. To make the process simple in-store, you can set up an Afterpay Card in the app and then add it to your digital wallet, such as Apple Pay, Google Pay or Samsung Pay.
• Exclusive offers — Some retailers (including Macy’s, Victoria’s Secret and Yeti) partner with Afterpay to offer exclusive options that you can’t get without using the app.
• Loan amounts may grow over time — All new Afterpay customers get a spending limit “of about $600” to start with, according to the company. But eventually that spending limit can grow if you make payments consistently on time.
• You can return purchases — When making a return, your purchase will be refunded to the original payment method, and it typically takes five to seven business days to get your refund.
• Can shop in store or online — With Afterpay, you can make purchases online or in store. To make the process simple when you’re shopping in a store, you can set up an Afterpay Card in the app and then add it to your digital wallet, much like Apple Pay, Google Pay, or Samsung Pay.

Who is an Afterpay loan good for?

Afterpay may be a good option for people looking to spread out the cost of a purchase without having to use a credit card or personal loan.

If you like budgeting and having an end date to your debt, you’ll probably appreciate that you can pay off your loan in four equal installments with Afterpay. And by making your payments on time, you may be approved to spend more.

On the other hand, strategically putting purchases on a zero-interest credit card could be an alternative to Afterpay — while also allowing you to earn valuable rewards. But if you opt for a credit card instead of a BNPL app, make sure to always make your minimum payments on time.

Does Afterpay build credit?

If you’re looking to establish a credit history, unfortunately, using Afterpay won’t help build your credit. Unlike traditional lenders, this buy-now, pay-later option doesn’t run a credit check when you apply for financing, but it also doesn’t report any of your payments to the three major credit bureaus. This means that using Afterpay can’t have any sort of effect — good or bad — on your credit health.

While each of the major credit-reporting agencies does now accept payment reporting from BNPL lenders, reporting is voluntary. Because of this, many BNPL lenders don’t participate in credit reporting. But take note: If you fail to pay your loan, your debt could end up in collections, which can negatively affect your credit scores.

It’s also important to note that BNPL apps like Afterpay could tempt users to head into debt. In fact, according to a 2021 joint Credit Karma/Qualtrics survey, 34% of respondents said they had fallen behind on payments at least once in a buy-now, pay-later plan. And a solid majority of that group saw their credit scores drop. So it’s good to make sure you understand the terms of your BNPL agreement and can make your payments on time.

Not sure if you can afford Afterpay financing? Try our budget calculator.

How to apply with Afterpay

To apply to use Afterpay, you need to first download its mobile app, which walks you through account setup and how in-store shopping works.

You’ll need to provide the following information:

• Email address
• Phone number
• Delivery address

For online purchases, you don’t need to register before you use Afterpay for the first time. Instead, you can choose Afterpay as your payment method at checkout and provide payment details like you normally would to complete your purchase. After your first order is approved, your Afterpay account is automatically created.

To finish the process, you just need to visit Afterpay’s website or download the Afterpay app to create a password so you can log into your account to make future purchases.

Not sure if Afterpay is right for you? Consider these alternatives.

• Affirm: Similar to Afterpay, Affirm offers buy-now, pay-later loans at major retailers. You may pay interest on your purchase, but typically won’t be subject to any fees. Affirm offers much larger loan amounts than Afterpay — up to $17,500 — though a down payment may be required.
• Klarna: Klarna also allows you to pay off purchases monthly or in four installments.

*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.