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Klarna 2019 Review: Should You Buy Now, Pay Later?

Jan. 2, 2019
Loans, Personal Loans, Personal Loans Reviews
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Klarna offers point-of-sale financing for online purchases like clothing, furniture and electronics. You may see the payment option at online merchants like Overstock.com, Lenovo, TaylorMade, Rancourt & Co., and others that have signed up to offer Klarna.

Klarna rates and terms

Minimum loan amount$35 for "pay later" and "slice it in 4" options

$300 for "slice it" option
Maximum loan amountDepends on purchase price, creditworthiness
APR 19.99% on standard purchases with "slice it" option; no interest, reduced interest and deferred interest promotions may also be offered

No interest if paid in full for "pay later" and "slice it in 4" options
FeesOrigination fee: None
Late fee: Up to $35
Returned payment fee: $35
Time to fundingImmediate
Repayments30 days for "pay later" option

6 weeks for "slice it in 4" option

Six to 36 months for "slice it" pay-over-time option
Soft credit check?In some instances
How to qualify
  • No minimum credit score
  • No minimum credit history
Best forBorrowers with limited access to credit and don’t have savings to cover a necessary online purchase
How to applyApplications are submitted at checkout through participating merchants

» MORE: Get a personalized plan to build your credit

Klarna review

Founded in Sweden in 2005, Klarna expanded to the United States in 2015, and its point-of-sale financing is now available at 100,000 online merchants across 14 countries, according to the company.

For eligible purchases, Klarna offers the following payment options, typically presented during the checkout process:

  • Pay later: With this “try before you buy” option, you shop online, receive your purchase and try it for 30 days. If you return the item, or keep it and pay the full balance within the trial period, you won’t pay interest.
  • Pay over time: This option, which Klarna calls “slice it,” gives you a line of credit to buy products online and pay for them over time, similar to using a credit card. The credit limit you receive depends on the size of the purchase and your credit history. Payments are made monthly, with terms starting at six months. Promotional financing options may be available, including no interest if you pay the balance in full before an expiration date.
  • Pay in installments: Klarna also offers a payment plan called “slice it in 4” that allows you to pay for a purchase in four equal installments. The first payment is charged to your credit or debit card when your purchase is shipped; subsequent payments are automatically charged every two weeks. This spreads the cost of the purchase over time, which may be helpful if you don’t have cash or available credit to buy it in full. Klarna also charges no interest. If you carry a balance on the credit card that Klarna charges, you will pay interest.

Klarna also offers a buyer protection guarantee, so you won’t be on the hook for products that do not arrive, are defective or damaged, or do not match the product description.

Is Klarna right for you?

KLARNA MAY BE A GOOD OPTION IF YOU:

Need to buy an online product immediately but don’t have money saved. Paying cash is always cheaper than financing a purchase. But if you receive a zero or deferred interest option from Klarna and can save enough to pay the balance by the due date, using Klarna is a way to receive your purchase now and pay later.

Are new to credit and do not qualify for a credit card. If you must finance your purchase, you may find Klarna easier to qualify for than a credit card. The company considers your credit score in addition to other factors, and there’s no minimum score required.

Have a credit card but don’t have a high credit limit. Taking a Klarna loan is better than maxing out a credit card, which can lower your credit score and incur penalty interest rates.

KLARNA IS NOT A GOOD IDEA IF YOU:

Receive a promotional interest rate, but can’t repay the balance on time. Klarna’s pay-over-time option may come with a reduced or deferred interest promotion, but it’s costly if you don’t pay off your balance in full before the expiration. Its pay later option should be repaid in full by the due date, which is 30 days after the purchase has been shipped.

Can use a credit card and pay it off in full. Unlike Klarna, credit cards may offer bonuses on spending, such as cash back and rewards. If you pay your balance in full each month, credit card purchases won’t cost you any interest. And credit card companies typically report payments to the credit bureaus, which helps build credit; Klarna does not report payments.

Credit cards may also offer purchase protection, which insures your products against theft or accidental damage for a limited time.

Pay only the minimum on your credit cards. If you don’t have the money to pay down your credit cards, it’s not a good idea to take out another loan, especially for a nonessential purchase.

How Klarna compares

Klarna is similar to point-of-sale financing from Affirm. It’s also comparable with personal loans for online purchases. Here’s how Klarna stacks up with other financing options.

 Klarna loanAffirm loanOther personal loans
Used forMaking a purchase at online merchantLoans through retailersAny purpose (debt consolidation, large purchases, medical expenses)
Loan amountsMinimum of $300 for "slice it" option

Minimum of $35 for "pay later" or "slice it in 4" options
$100 - $10,000Between $1,000 and $50,000
APR range0% to 19.99% (depending on promotion)10% to 30% (0% available at some retailers)5.00% to 36.00%
Loan duration6 to 36 months3, 6, 9 or 12 months2 to 5 years
Time to fundingImmediateImmediateUp to a week
FeesLate feeNoneOrigination fee, late fee
Credit checkHard check for "slice it"

Soft check for "pay later"

No check for "slice it in 4"
Soft checkSoft check, followed by hard check

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