Klarna Review 2021: Should You Buy Now, Pay Later?

Klarna’s Pay in 4 plan lets you divide your purchase cost into four interest-free installments instead of paying all at once.

Jackie VelingMar 8, 2021
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Our Take

The bottom line: Klarna may be a fit for borrowers who are shopping for a big-ticket item and can comfortably afford the monthly payments.

Klarna

Klarna

Min. Credit Score

None

Est. APR

19.99%

Pros & Cons

Pros

  • No-interest financing options.

  • No prepayment fees.

  • Access to exclusive deals.

Cons

  • Offers small loan amounts.

  • Charges late fee.

  • Doesn’t report on-time payments to the credit bureaus.

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Full Review

Klarna offers point-of-sale loans for online and in-store purchases through its mobile app. These loans allow customers to buy now and pay later at popular retailers like Macy’s, Etsy, Foot Locker and Sephora.

Founded in Sweden in 2005, Klarna has expanded to 17 countries and serves 90 million shoppers. Its financing model is similar to companies like Afterpay and Affirm, which also provide short-term loans at checkout.

Though it’s usually best to pay for something outright instead of using a loan, point-of-sale financing may make sense for buyers purchasing a big-ticket item, as long as the loan charges little or no interest and you can comfortably afford the payments.

How does Klarna work?

Klarna’s most popular payment plan, Pay in 4, lets shoppers split their purchase into four equal installments to be paid every two weeks, with the first due at checkout.

For example, if your purchase costs $200, you would pay $50 at checkout. The three remaining $50 payments would each be billed to your debit or credit card every two weeks until you’ve paid the full $200.

Installments are interest-free, but the company charges a late fee of up to $7 if the payment is unsuccessful after two tries. There is no penalty for making a payment early or paying off your balance in full before the final due date.

Another interest-free Klarna payment plan is Pay in 30. Instead of paying at checkout, shoppers have 30 days after the item has shipped to pay for their purchase. Since you pay only for what you keep, this allows online shoppers to try before they buy, according to the company.

Klarna also offers a Pay Now option. This is similar to making an immediate purchase with a debit or credit card, but you check out using the app, so you have access to in-app content like price-drop notifications and exclusive deals with Klarna’s retail partners.

Lastly, Klarna offers a traditional loan option available at select retailers. Loan terms range from six to 36 months with annual percentage rates of 0% to 29.99%. The APR for standard purchases is 19.99%.

Terms

Amount due at checkout

Interest

Late fee

Pay in 4

Pay four equal installments, due every two weeks.

First installment (your balance divided by four).

No interest.

Up to $7.

Pay in 30

Pay nothing for 30 days, then pay the full balance.

$0.

No interest.

None, but if you don’t make the full payment, you could be considered in default.

Pay Now

Pay with your debit or credit card through the Klarna app.

Full balance.

No interest.

N/A.

Financing

Pay with a loan ranging from 6-36 months.

$0.

0%-29.99%; 19.99% for standard purchases.

Up to $35.

Should you use Klarna?

Paying cash is always cheaper than financing a purchase. However, Klarna can help you purchase something you need but can’t fully cover upfront — as long as you're certain you can afford the subsequent payments.

Look specifically for a payment plan that charges little to no interest. In this case, the Pay in 4 or the Pay in 30 plans would be your best bet.

Klarna may be a good option if you:

Need to buy a big-ticket item. If you can’t pay the full price of your purchase at checkout, but can save enough to make on-time payment(s), using Klarna is a way to get your item now and pay later.

Are new to credit and do not qualify for a credit card. You may find Klarna easier to qualify for than a credit card. The company considers your credit score in addition to other factors, but 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.

Want to use the Pay Now feature. The Pay Now option for Klarna requires no financing, but you could get access to lower prices on the items you want.

Klarna is not a good idea if you:

Want to use a POS loan to build credit. Klarna does not report on-time payments to the credit bureaus, though it may report missed payments. On-time payments can help build your credit score only if the lender reports them.

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.

Have a hard time keeping track of your balance. When you choose a payment plan, Klarna automatically bills your debit or credit card, meaning it’s easy to overdraw if you don’t know how much money is available in your account.

If Klarna is unsuccessful in charging your account, you could be charged a fee or the loan could be considered in default.

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Alternatives to Klarna

Personal loans: If you’re considering Klarna’s financing plan, you may want to research what APR you could get on a personal loan. If you qualify for a lower rate, you may save money in the long-term.

Most lenders offer pre-qualification for personal loans, so you can check available rates without impacting your credit score.

0% interest credit card: If you have good or excellent credit, you could also apply for a 0% APR credit card. These cards offer introductory periods up to 18 months and charge no interest during that time. You may also receive a sign-up bonus or access to a rewards program.

Unlike Klarna, most lenders and credit card companies will report on-time payments to the credit bureaus, which could help build your credit.

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Frequently asked questions