Layaway and buy now, pay later (BNPL) are both financing options that allow you to purchase items and pay for them in installments. However, there are some key differences between the two.

Layaway

Traditionally, layaway was a service offered by in-store retailers. It allowed customers to put down a deposit on an item and then make payments over time until the full purchase price was paid off. Once the full price was paid, the customer could take the item home.

Layaway was a popular way for people to budget for larger purchases, such as Christmas gifts or appliances. It was also a good option for people who didn't have a credit card or who didn't want to use their credit card to make a purchase.

Buy Now, Pay Later

BNPL is a newer financing option that has become increasingly popular in recent years. It is offered by a variety of companies, including Klarna, Afterpay, and Affirm.

BNPL allows customers to purchase items online or in stores and then pay for them in installments over time. Typically, BNPL plans split the purchase price into four equal installments, due every two weeks.

One of the key differences between layaway and BNPL is that with BNPL, customers receive the item immediately. They do not have to wait until the full purchase price is paid off to take it home.

Potential Risks of Buy Now, Pay Later

While BNPL can be a convenient way to finance purchases, it is important to be aware of the potential risks.

Overspending: Because BNPL allows customers to receive items immediately without paying the full purchase price, it is easy to overspend. Customers may be tempted to buy more than they can afford, thinking that they can easily make the payments over time.
Late Fees: BNPL companies typically charge late fees for payments that are not made on time. These late fees can add up quickly and make it difficult to pay off the balance.
Impact on Credit Score: BNPL companies may report your payment history to the credit bureaus. If you miss payments, it could negatively impact your credit score.

How to Use Buy Now, Pay Later Responsibly

If you are considering using a BNPL service, it is important to do so responsibly. Here are a few tips:

Create a Budget: Before you use a BNPL service, make sure you have a budget and that you can afford the payments.
Only Buy What You Need: BNPL can make it tempting to buy things you don't need. Resist the urge to overspend.
Set Up Reminders: Set up reminders so you don't miss payments.
Pay Off Your Balance In Full As Soon As Possible: The sooner you pay off your balance, the less interest and fees you will pay.

Both layaway and BNPL can be helpful financing options for people who need to budget for larger purchases. However, it is important to be aware of the potential risks of BNPL and to use it responsibly. If you are considering using a BNPL service, be sure to create a budget, only buy what you need, set up reminders, and pay off your balance in full as soon as possible.