A point-of-sale loan lets you break down a purchase into a series of smaller payments, so you can buy now and pay later.
In recent years, point-of-sale financing has rapidly expanded in the United States, with lenders like Klarna, Afterpay and Affirm now partnering with major retailers, including Macy’s, Bed Bath & Beyond and Walmart, to bring the option to consumers.
Choosing a point-of-sale loan can make sense if it charges zero to minimal interest and the payments don’t stress your budget. But if the interest rate is high, consider other types of loans to finance your purchase — even if they’re less convenient.
How to get a point-of-sale loan
To apply for a point-of-sale loan, you’ll need to create an account with the lender. This is usually integrated directly into your checkout experience.
Once you opt in, you’ll provide basic personal details like your name, date of birth and address. You may also be asked for your Social Security number, and most companies will perform a soft credit check, which does not impact your score.
You’ll then see the breakdown of your payment plan options. Point-of-sale loans divide your balance into installments, spread out evenly over an agreed-upon repayment term, with the first installment due at checkout.
For example, if your total is $100 with a zero-interest, two-month repayment plan that comes due every two weeks, you would pay four installments of $25. After you input your payment information and billing address, and agree to the terms and conditions, your debit or credit card will be charged for the first payment and automatically charged every two weeks until your balance is paid in full.
Just like applying for a store credit card, the whole process takes anywhere from a few seconds to a few minutes. The approval decision is instantaneous.
Depending on the financing company, interest and late fees may be applied.
Are POS loans a good idea?
Point-of-sale financing can be a good option when you need to make a purchase you can’t cover outright and the installments fit comfortably in your budget. You should also look to pay zero to minimal interest.
Consider a POS loan if:
You’re new to credit: Companies that offer point-of-sale financing have more lenient criteria when deciding whether to approve you for a loan. Though some lenders check your credit score, others focus on the funds available on your debit or credit card, the repayment term and the price of your purchase.
Some companies also report your payment history, which can help your credit score if you make all payments on time.
You’re making a big, one-time purchase: Point-of-sale loans are useful when you need to get a new mattress, piece of furniture or some other big-ticket item, but don’t have a credit card or prefer the simplicity of fixed monthly payments.
You won’t pay much interest: While some retailers may offer zero-interest rates, that won’t always be the case. For example, annual percentage rates at Affirm can be as high as