What exactly is point-of-sale (POS) financing?
Well, instead of pulling out your credit card the next time you purchase an item in-store or online, POS financing allows you to choose an installment loan – right from the checkout.
As Fintech firms continue to merge their technology with established retailers, their goal is to make large purchases more attainable for consumers. When you’re at the checkout, you can click on the POS option located on the payment page. It then asks for your name, date of birth, phone number and sometimes the last four digits of your Social Security number. In a matter of minutes, the platform will review your financial history and decide whether or not you qualify for a loan.
But while the process is simple and easy – is POS financing legit?
Or is it just another manipulative product that encourages you to spend more?
Well, we’ve been asked these questions and that’s why we created this guide. In this article, we’ll breakdown the best POS lenders out there, let you know what they have to offer and provide all the information you need to decide if POS financing is right for you.
|Loan Company||Min Credit Score||APR||Amount|
|Affirm||0||0% – 30%||$17,500|
|Bread||0||0% – 29.99%||$20,000|
|Klarna||0||0% – 19.99%||$35,000|
|Greensky||0||0% – 26.99%||$65,000|
NOTE! Much more better way to find you best loan offer is to shop around and pick companies based on your credit score.
Offering loans up to $17,500, Affirm is one of the leading POS lenders in the marketplace today. APRs range from 0% to 30% and active duty military personnel have APRs capped at 6%. Loan durations vary from 3 to 12 months but can extend to 48 months for larger loans. However, finalized terms depend on where the item is purchased and your overall credit profile. Affirm also has no minimum credit score requirement or annual income requirement – which makes it a great option for borrowers with bad credit.
The best part about the service is the company charge zero fees. There are no loan origination fees, prepayment fees, service fees or late payment fees. However, because Affirm reports your repayment behavior to Experian – a leading U.S. credit bureau – late payments can affect your credit score.
So how do you apply for an Affirm loan?
Well, after you create an account, you have three options.
- Apply At The Store: Simply add the item to your checkout cart, enter your mobile phone number, then enter the 4-digit pin that’s texted to you by the company. Once complete, you’re notified whether or not you qualify for a loan and given your finalized terms.
- Apply Using Its Mobile App: Download the Affirm app from the Apple App Store or Google Play Store and follow the first two steps above; after you’ve entered the 4-digit pin, you click on ‘request a loan;’ next you let Affirm know where you’re shopping and the amount of money you need. Once complete, you’re notified whether or not you qualify for a loan and given your finalized terms.
- Apply Through Affirm.com: Sign into your Affirm account and type in the 4-digit pin texted to your phone. Click ‘request a loan’ and let Affirm know where you’re shopping and the amount of money you need. Once complete, you’re notified whether or not you qualify for a loan and given your finalized terms.
And what do you need to qualify?
- You must be at least 18 years of age or 19 in Alabama and Nebraska
- You must be a U.S. citizen or a permanent resident
- You must have a mobile phone number for verification purposes
When it comes time to repay your loan, you either log into your online account or use the mobile app. Here you can transfer funds from your checking account or debit card. If you prefer, you can also mail the company a physical check.
Affirm financing is available in every U.S. state except for West Virginia and Iowa. Because of state law, Affirm is not allowed to offer loans in these jurisdictions.
Now what about Affirm’s partner stores?
Sporting a wide variety of consumer options, Affirm partners with fashion, travel, sports and fitness, electronics, beauty, kitchen, automotive and music retailers. Some of its most well-known partners include Warby Parker, Expedia, Wayfair, Hoover, Casper and Motorola.
- Easy and fast approval.
- High loan amounts upwards of $17,500.
- Fair APRs that range from 0% to 30%; as well APRs are capped at 6% for active military members.
- Affirm charges zero fees: no loan origination fees, prepayment fees, service fees or late payment fees.
- There is no minimum credit score requirement or annual income requirement.
- Affirm reports your repayment behavior to Experian, which can increase your credit score if you pay in-full and on-time.
- Not all applicants qualify.
- Since Affirm reports to Experian, late payments can hurt your credit score.
- Loans are not available in West Virginia or Iowa.
- A mobile phone number is required to use the platform.
If you need financing and credit cards aren’t a viable option, Affirm POS loans are a great way to obtain the funding you need at a competitive interest rate. The company’s APRs range from 0% to 30%, but if you have bad credit, you’re finalized rate will likely fall near top-end of the range. For active duty military members, APRs are capped at 6%, which makes it a great option if you’re currently in the service. What separates Affirm from other lenders is the company charges zero fees. There are no loan origination fees, prepayment fees, service fees or late payment fees – which means your only out-of-pocket cost is the interest-owed. So while an unsecured personal loan should always be your first option, POS financing from Affirm is a great alternative for borrowers that don’t qualify.
Offering loans that range from $100 to $20,000, Bread is another reliable POS lender that tops our list. APRs range from 0% to 29.99% and terms range from 3 to 48 months. Bread also charges zero prepayment fees, so there’s no penalty for paying off ahead of time.
To determine your credit limit and APR, Bread works with its partner institution – Cross River Bank – to assess credit risk and provide loan terms that match your credit profile. The company only conducts a soft credit pull, so none of its practices will have a negative impact on your credit score. But keep in mind, Bread does report your repayment behavior to TransUnion, so late payments can hurt your credit score.
To qualify for a Bread account, you must:
- Be at least 18 years old or 19 in Alabama and Nebraska
- Be a legal resident of the United States
If your loan application is denied, Bread will typically notify you within 30 minutes outlining why you weren’t approved. There is a special category of Counteroffers (where customers are approved by Bread but not for the full amount) that will be sent 7 days after submitting. But keep in mind, after a denial, you can’t apply for another Bread loan for the following 90 days.
As a middle-ground option, Bread offers a ‘split payment’ loan to borrowers who don’t qualify for a full loan. Rather than finance the entire purchase, Bread lets you pay a certain amount upfront – using your debit or credit card – and the company will finance the remaining balance.
- High loan amounts, up to $20,000.
- Fair APRs that range from 0% to 29.99%; as well as rates no higher than 6% for certain eligible servicemembers.
- Bread performs a soft credit pull so applying won’t hurt your credit score.
- There are zero prepayment fees.
- If you don’t qualify for the full amount, you may be eligible for a ‘split payment’ loan.
- Bread reports your repayment behavior to TransUnion, which can help boost your credit score.
- Not all applicants qualify
- Since Bread reports to TransUnion, severe delinquency can hurt your credit score.
- A mobile phone number is required to use the platform.
Like Affirm, Bread is another reliable POS lender that makes the checkout process seamless and easy. The company offers loans up to $20,000 and APRs are in the healthy range of 0% to 29.99%. If you can’t obtain an unsecured personal loan, Bread offers a great alternative. With APRs similar to personal loans, the company allows you to keep your interest costs at a manageable level. As well, there are no prepayment fees and the company doesn’t list any charges for late payment. So, if you’re looking for a reliable financing option for your next retail purchase, put Bread near the top of your list.
As another reliable POS lender, Klarna has APRs that range from 0% to 19.99% – which is 10% less than its competitors above. There is no minimum credit score to qualify and loan durations range from 30 days to 36 months. As well, the company charges zero loan origination fees and zero prepayment fees. However, late payment fees range from $10 to $35 and return payment fees can be upwards of $35.
A major difference between Klarna and its competitors above is the company doesn’t directly disclose its maximum credit limits. The minimum purchase to use the service is $35, however, the maximum amount depends on the item purchased, your credit history and an affordability assessment.
When purchasing an item through the Klarna app, you have three payment options to choose from:
- Pay Later: This option allows you to purchase an item and try it for 30 days. You’re billed when the item ships, but if you pay off the balance within the 30 days, you don’t incur any interest charges. Similarly, if you return the item within 30 days, interest charges don’t apply.
- Slice It: This option is Klarna’s line of credit. Similar to a credit card, you can purchase multiple items and pay back the proceeds over time. As well, you have to make minimum monthly payments on your balance, but interest charges can be waived if you repay the funds within a certain timeframe. The standard APR for its line of credit is 19.99%, but it can be less for special purchases and during promotional periods.
- Pay In 4 Interest-Free Installments: Here, you pay for your item using four equal installments. The process works like this: you make your first payment upfront, then Klarna bills your debit or credit card every two weeks until four payments are complete. Similar to ‘Pay Later,’ there are no interest charges as long as you don’t miss a payment.
For the ‘Pay Later’ option, if you don’t repay the balance by the due date, you will be subject to a late payment fee of $10. Here, Klarna also performs a credit check, but the company insists it’s not a full credit check and only a soft pull applies.
For the ‘Slice It’ option, your minimum monthly payment is the greater of $25 or 2% of your outstanding balance plus interest and applicable fees. Be aware though, Klarna conducts a full credit check here, so a hard credit pull will most likely apply. As well, late payment fees can cost upwards of $35.
For the ‘Pay In 4 Interest-Free Installments,’ there is no credit check. But if you choose this option, you can’t refinance your loan. As well, late fees cost upwards of $10.
What makes Klarna so popular is the company partners with plenty of well-known retailers. These include Nike, Adidas, Taylor Made, Microsoft, Expedia, H&M, Overstock and many others.
- APRs are less than its competitors and are capped at 19.99%.
- ‘Pay Later’ and ‘Pay In 4 Interest-Free Installments’ allow you to finance items without paying any interest.
- There are zero loan origination fees and zero prepayment penalties.
- ‘Pay In 4 Interest-Free Installments’ requires no credit check.
- You can obtain lower APRs for special purchase items and during promotional periods.
- Klarna partners with many well-known retailors.
- For large purchases, not all applicants qualify.
- For ‘Pay Later’ and ‘Pay In 4 Interest-Free Installments,’ a late fee of up to $10 will apply and for the ‘Slice It’ option, a late fee of up to $35 will apply.
- The ‘Slice It’ option requires a full credit check which may impact your credit score.
Since expanding into the U.S. market in 2015, Klarna has established relationships with plenty of well-known retailors. Whether it’s companies like Nike, Microsoft or Taylor Made, Klarna offers financing solutions at places you actually want to shop. Best of all, Klarna offers extremely affordable APRs. While its competitors are capped at roughly 30%, Klarna caps its APR at 19.99%. Moreover, the company offers three different financing options. You can choose from ‘Pay Later’ and ‘Pay In 4 Interest-Free Installments’ – which allows you spread out your payments interest free – or choose the ‘Slice It’ option which acts as a line of credit. Whatever your preference, with Klarna, you can find affordable financing to help make your next big purchase a reality.
Specializing in home improvement financing, Greensky partners with over 15,000 merchants to help generate funding for consumer home repairs. So whether it’s upgrading your kitchen or fixing a leaky roof, Greensky can provide the financing you need for almost any job.
Loans top-out at $65,000 and its APRs range from 0% to 26.99%. As well, since loans are used for long-term projects, repayment durations range from 6 months to 12 years. Keep in mind though, Greensky isn’t an actual lender. The company acts as a middle-man, connecting banks and home improvement retailors with borrowers. The process results in increased efficiency and enables both banks and retailors to effectively manage credit risk.
So how do you apply for a Greensky loan?
Well, the process is stricter than the platforms above. To obtain financing, you need to send them a photo of your driver’s license for verification purposes. Next, you open an account through its mobile app. Input your name, date of birth, annual income, desired loan amount and your Social Security number. To determine whether or not you qualify for a loan, Greensky performs a hard credit pull, which can have a negative effect on your credit score. If approved, you obtain a line of credit that can be used for nearly any home improvement or repair project.
Greensky offers two different loan structures:
- Deferred Interest Loans: This option has an interest-free promotional period that ranges from 6 to 24 months. If you repay the loan proceeds before the promotional period ends, you don’t incur any interest charges. However, any amount leftover after the promotional period ends incurs an APR from 4.99% to 23.99%.
- Reduced-Rate Loans: If you prefer a longer loan duration, you can opt for a reduced rate loan that’s repaid over 5 to 12 years. APRs range from 0% to 26.99%, but the finalized rate depends heavily on your credit profile.
With Greensky, there are zero loan origination fees, but you are charged a one-time account activation fee of $39. And although it’s not a requirement, most borrowers on the platform have good to excellent credit scores, which makes it hard for those with bad credit to obtain loans. However, Greensky does offer a co-signer option which will improve your chances of being approved.
- High loan amounts upwards of $65,000.
- Fair APRs that range from 0% to 26.99%.
- Promotional periods of 6 to 24 months allow you to repay the balance in-full without incurring any interest charges.
- The are no loan origination fees.
- Its co-signer option can increase your chances of approval.
- Financing can only be used for home improvement projects or repairs.
- Greensky performs a hard credit pull, which can hurt your credit score.
- Although there is no minimum credit score requirement, applicants with bad credit may not qualify.
- The company charges a one-time account activation fee of $39.
If you’re in need of reliable home improvement financing, Greensky is a great place to start. Loans can reach upwards of $65,000 and APRs are capped at 26.99%. The best part about a Greensky loan is the company offers long promotional periods. Spanning from 6 to 24 months, if you repay the funds before the promotional period ends, you won’t incur any interest charges. Keep in mind though, once the promotional period ends, interest charges will apply to the remaining balance. The downside of a Greensky loan is the company performs a hard credit pull, which can have a negative effect on your credit score. As well, borrowers with bad credit may not qualify. The company doesn’t have a minimum credit score requirement, but most of its applicants have good to excellent credit. As a side benefit though, the company does offer a co-signer option. So if you have bad credit, but know someone willing to act as a guarantor, it will greatly improve your chances of obtaining a loan.
What Are The Pros And Cons Of POS Financing?
While POS financing is great under certain circumstances, we only recommend a POS loan after you’ve exhausted all other resources.
Some positives of POS financing include:
- Fast And Easy Approval: With no minimum credit score requirement and immediate access to funds, you receive the financing you need in no more than a few minutes.
- Great If You Have Bad Credit Or No Credit: When you have bad credit or no credit history, it’s hard to obtain reliable financing. When personal loans and credit cards aren’t an option, POS financing is a great alternative.
- Seamless Technology: POS platforms make financing easy and intuitive. At the click of a button, your APR and loan terms are clearly presented, which makes the entire process hassle-fee.
Some negatives of POS financing include:
- Loans Are Expensive: With APRs upwards of 30%, interest costs will add up quickly. For example, if you use Affirm to purchase a queen-size mattress from Casper for $1,095 – assuming a 30% APR repaid over 12 months – you’re looking at $186 in total interest paid.
- You Risk Falling Into A Debt Trap: When financing is this easy, you may end up purchasing items you don’t even need. If you don’t keep track of your spending, bills can quickly get out of hand.
- You Don’t Have Time To Read The Terms And Conditions: When you’re excited about purchasing a new item, the last thing on your mind is loan origination fees, late payment fees, return fees, how late payment affects your credit score or whether your data is shared with third-party vendors; but these issues are important and a few minutes at the checkout just doesn’t cut it.
Should POS Financing Be Your First Option?
When credit is accessible right at your fingertips, it can lead to impulse purchases and spending beyond your means. If it gets out of control, you can find yourself stuck in a vicious debt trap.
We don’t want that to happen.
So, before you opt for a POS loan, try this pathway first:
- Go To The Store Or Shop For Your Favorite Product Online: If you have your eye on a certain product – rather than purchasing it right away – file it away and move on to step two.
- Apply Online For An Unsecured Personal Loan: Even if you have bad credit, unsecured personal loans are available to borrowers of all credit scores. Processing takes as little as 1 to 3 business days, so the added wait won’t be much of a burden.
- Choose The Option With The Lowest APR: Remember, personal loans have APRs that range from 5.99% to 35.99%. Regardless of your credit score, it’s possible to obtain a personal loan with an APR of 10% or less.
While POS financing can make big-ticket items more attainable, we recommend you exercise caution before diving in. After analyzing thousands of lending products, we know that unsecured personal loans are the best option in the marketplace today. APRs are extremely affordable and personal loans offer greater repayment flexibility. Conversely, with POS financing, you receive similar benefits, but APRs are much higher and the easy approval process can lead you to spend beyond your means. Now, if it’s an emergency and the item is required right away, POS financing may be right for you. However, if the item can wait, obtaining a reliable personal loan will keep your out-of-pocket costs at a minimum.