Buy now, pay later against layaway


Consumers have more options when shopping, whether online or in stores beyond traditional payment methods. Buy now, pay later (BNPL) allows them to divide their purchases into four to six installments, often without interest charges.

It is estimated that 60% of Americans have used a BNPL service at least once, according to a survey by C + R Research. Which raises an important question: is buy now, pay later replacing the traditional layaway? While these point-of-sale installment loans share some commonalities with layaway, they also differ in important ways.

Key points to remember

  • Buy Now, Pay Later Financing is a type of short-term loan that allows buyers to split payments, usually into four installments.
  • BNPL’s services often allow users to make interest-free payments.
  • Some of the more popular apps and platforms include Affirm, PayPal, and Zip.
  • While layaway allows buyers to pay slowly, they don’t receive their purchases until after all payments have been made.
  • Consumers with poor or no credit may still be eligible for BNPL or Layaway as they may not need a credit check.

How to buy now, pay later works

BNPL is a short term funding option. When a consumer uses buy now, pay later to make a purchase online or in a store, they are essentially agreeing to take out a short-term loan. These point-of-sale installment loans are offered by a variety of platforms, comprising:

Buy Now, Pay Later, loans typically require buyers to make an upfront payment at the time of purchase and then pay off the balance in three or more installments. Many buy now, pay later services generally charge no interest on these loans. They often do not need a firm credit check, or in some cases, any credit check, to be eligible.

Point-of-sale installment loans are typically used to make relatively small purchases, but they can add up over time. The average consumer with an unpaid purchase now, pays a debt later owes $ 883, and makes payments for four purchases. In terms of credit limits and how much can be spent using a point of sale installment loan, which is usually determined by store and platform buy now, pay later.

Before you decide to use a buy now, pay for a service later, check the fine print on late payments, late fees, and credit reports to see what the consequences might be if you fall behind.


PayPal and some credit card companies, including American Express, also offer an installment payment option to eligible buyers.

How the layaway works

Set apart is a payment plan that stores can offer to buyers. Most layaway plans work the same, including:

  • Allowing you to choose the items you want to purchase
  • Require a deposit against the full cost of these items
  • Make you make payments over time on the balance owed
  • Return the items you have purchased once final payment has been made

Stores that offer layaway plans may charge a fee to use them, although you typically won’t pay any. interest since it is not a loan. This is because buyers are not borrowing money to use the layaway. Instead, they make payments on the items the store holds for them.

To note

Some stores only offer layaway plans at certain times of the year, such as the fourth quarter leading up to the holiday season.

Advantages and disadvantages of buying now, paying later

Buying now, paying later can have both advantages and disadvantages for buyers. We have listed some of the most common ones below.


These plans may not require any interest payments. This is a plus compared to shopping with a credit card which probably has a double digit annual percentage rate (APR).

Point-of-sale installment loans may also be available to consumers who do not qualify for credit cards or other loans due to their credit history or lack of it. Afterpay, for example, does not require a credit check to qualify.


Buy now, pay later, arrangements could negatively affect your credit if a point-of-sale installment loan is not paid off. A BNPL platform can report overdue accounts to credit bureaus or transfer overdue accounts to a debt collector.

There is also the possibility of overspending. According to the 2020 C + R Research survey, 57% of BNPL users said they regretted making a purchase with a point-of-sale installment loan because the item was too expensive. Overall, 66% of users who buy now and pay later say it’s a risky way to pay.

And although the number of retailers who accept buy now, pay later grows, not all stores have signed. So you may not be able to use it at all, depending on where you shop.

The inconvenients
  • Late and missed payments affect credit scores.

  • There is a risk of overrun because the purchase apparently becomes easier.

  • Not all stores offer BNPL services.

Advantages and disadvantages of layaway plans


Like buy now, pay later, layaway may not require a credit check, making it a convenient option for some consumers. But unlike BNPL, which often divides payments into four installments that are due within a relatively short period of time, layaway plans can offer more time to pay. For example, you might have two to three months or more to pay off the entire balance.

Plus, a layaway plan won’t damage your credit score if you’re unable to make the payments. Instead, you can cancel the plan and, depending on the store, often get your deposit and past payments refunded, although cancellation fees may apply.


There are, however, a few caveats to keep in mind. First, when you use layaway, the merchandise you buy isn’t available to you until you’ve paid in full. You may also be required to spend a minimum amount to use the layaway. And some items may be excluded from layaway purchases.

  • This may not require a credit check.

  • You have more time to pay.

  • It won’t hurt your credit score if you miss payments.

  • Deposits and payments may be refunded if you cancel the plan.

The inconvenients
  • You can only take layaway items home with you after you have made the last payment.

  • Minimum amounts may apply for layaway.

  • Item exclusions may apply.

To note

Layaway plans may only be available for purchases made in-store, not online.

Buy now, pay later for a layaway: what’s best?

BNPL agreements and layaway plans give buyers time to pay for their purchases, often without interest charges. To know which one is better, the answer may depend on:

  • When you want or need the items you buy
  • How long do you need to pay them

With a BNPL plan, you can get the items you buy immediately. You will usually need to make your first payment for the plan as a deposit, but there is no waiting period to get the merchandise like there is with a layaway plan.

On the other hand, the layaway can give you more time to pay off than a BNPL loan. So which is best may ultimately depend on when and why you are making a purchase in the first place.

The bottom line

Buy now, pay later, and layaway plans each have their pros and cons for buyers, but both can be an affordable way to pay. However, if you have good credit and want to recoup some of what you spend in the form of miles, points, or cash, you may want to consider a credit card rewards instead of.

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