Customers are increasingly using buy now, pay later options when they shop online or in physical stores. A recent survey found that 39 percent of consumers have used payday or similar installment loans at some point in their lives.
There are a number of websites like Klarna that offer this type of funding to their customers.
The company, which began in Sweden in 2005, has since expanded to service an estimated ninety million customers, with two million transactions handled daily.
What is the Process of Using Klarna?
Klarna is a service that allows customers to make immediate purchases yet spread out their payments over time. You can pay with the Klarna app at any online store that accepts it, or you can select Klarna as a payment option at checkout.
In the event that you decide to finance your purchase, interest will not be charged and you will have several options for paying back your debt.
For example, you can finance your purchase over a period of six to thirty-six months (Pay in 6), pay it out in full in thirty days (Pay in 30 Days), or pay it off in four equal interest-free installments (Pay in 4).
A Klarna purchase must be at least $10.
We don’t have a hard credit limit in place. Instead, the user can estimate the remaining spending power by tapping the app’s “Purchase Power” button. Your credit limit is calculated using various variables, including your payment history and current balance.
In general, your Purchase Power will increase as you make more frequent and timely payments with Klarna.
Interest and Fees
If you select either the 4- or 30-day interest-free payment plans, Klarna won’t charge you anymore. If you pay off your balance in full and on schedule, you won’t be charged any interest on either of these “buy now, pay later” plans.
However, if you use Klarna’s financing alternatives, you may be subject to interest fees. That includes any sort of regular monthly payments or loans. Purchase interest rates range from 0% to 24.99% per year. If you qualify for the “No Interest If Paid In Full” deal, you can perhaps avoid paying interest.
If your payment is late, Klarna may assess a late fee. If Klarna makes a second unsuccessful attempt to collect money from you, a $7 fee will be applied.
Does Klarna Allow Bill Payments?
No. While Klarna’s competitors may provide bill payment as an option, it was created specifically for online purchases.
How Does Klarna Impact My Credit Score?
Your credit score may take a hit if you use a short-term financing option like buy now, or pay later. Applying for a loan, making loan payments, or even missing a payment could all have an impact on your credit score.
As far as we can tell, Klarna does not share payment information with any of the three major credit bureaus. If you fail to make a payment or otherwise default on a payment agreement, however, this could be reported. Furthermore, Klarna has the right to send your account to a debt collection agency in order to recover any sums still owed.
Does Klarna Run Credit Checks?
As you use Klarna, they will check your credit. You might expect either a soft or hard credit check, depending on the method of payment you select.
If you select Klarna’s 4-pay installment plan, known as “Pay in 4,” a mild credit check will be performed. Klarna may conduct a thorough credit check if you choose to finance your purchase over time with monthly payments.
A rigorous credit check can lower your score by a few points, but a soft inquiry has no effect.
Do You Need a Credit Card with Klarna?
If you have established enough of a credit history for a soft or hard credit check, not having a credit card is not a determining factor in your approval.
Credit reports are one aspect that Klarna uses to determine whether or not to approve a customer, but there are others as well. In some cases, such as if you’ve made too many purchase requests in a short period of time or if you have a poor payment history for previous Klarna loans, you may be denied financing.
Your credit score will not drop if you’re repeatedly turned down. Also, even if Klarna finance is declined the first time around, you might be eligible the next.
What is the Klarna Payment Process?
If you need to make a payment to Klarna, you can do it in a number of ways. Klarna takes Mastercard, Visa, American Express, and Discover, among other cards.
Prepaid cards cannot be used as a form of payment with Klarna. The Klarna app allows for both one-time and recurring payments.