The Bottom Line: Klarna works best if you receive a no-interest option and pay off the balance within 30 days.
Min. Credit Score
Pros & Cons
No minimum credit score required.
No origination fees.
Small loan amounts.
Costly if you can't repay in full quickly.
Klarna offers point-of-sale financing for online purchases like clothing, furniture and electronics. You may see the payment option at online merchants including Overstock.com, Lenovo, TaylorMade, Rancourt & Co. and others that have signed up to offer Klarna.
Founded in Sweden in 2005, Klarna expanded to the United States in 2015, and its point-of-sale financing is now available at 130,000 online merchants across 14 countries, including 3,000 merchants in the U.S., according to the company.
Klarna is similar to point-of-sale financing from Affirm, which provides short-term personal loans for one-time purchases.
Klarna payment options
For eligible purchases, Klarna offers the following payment options, typically presented during the checkout process.
Pay in 30 days: 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.
Financing: Klarna provides a loan to buy products online and pay for them monthly over three to 36 months, at a maximum annual percentage rate of 19.99%. Promotional financing options may be available, including no interest if you pay the balance in full before an expiration date (six or 12 months). Payments may be made online or in the Klarna app.
Installments: Klarna offers interest-free financing with four installment payments. The first payment covers 25% of the purchase and is charged to your credit or debit card when your order is processed, while the remaining three payments are charged automatically every two weeks. Klarna charges no interest; however, if you carry a balance on the credit card that Klarna charges, you will pay interest.
Klarna also offers a buyer protection policy, 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.
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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 financing loan option may come with a no-interest promotion, but it’s costly if you don’t pay off your balance in full before the promotion expires. Its pay-in-30-days 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 every 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. Instead, do what you can to start saving for the things you want.
How Klarna compares
Affirm is a similar point-of-sale financing company that offers shopping loans through retailers including indoor-bike maker Peloton and the mattress company Casper. Klarna is also comparable with personal loans for online purchases.
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