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Point-of-Sale Financing: How to Finance Purchases Online

Are you looking to finance an online purchase without going into credit card debt? For decades, brick-and-mortar stores offered financing options for large purchases with their POS systems at checkout. Now, with the advent of online shopping, online vendors are joining the fray. Third-party point-of-sale financing companies partner with vendors to provide installment plans, consumer loans, lines of credit and other financing options for online shopping.

But how does point-of-sale financing work? And is it the right financing solution for you?

How does online point-of-sale financing work?

Point-of-sale financing is like financing your purchase with a small loan. Instead of paying for a given product with a lump sum, you’ll make smaller monthly installment payments. Point-of-sale financing options are typically found next to the online cart or checkout page of an online vendor. To take advantage of this payment option, just submit a small application with some personal information.

Who offers point-of-sale financing?

Check out the following third-party financing companies and financial institutions offering point-of-sale loans:

SuperMoney

SuperMoney’s turn-key financing solution provides point-of-sale financing for online vendors in all industries such as retail or home improvement. It’s the only point-of-sale financing platform that lets buyers comparison shop to find the best deal. How does it work? Just submit a quick application to receive a list of pre-approved, personalized loan offers from top lenders.

  • Get Competing Offers for Personal Loans

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Affirm

Affirm is a San Francisco-based company partnered with modern retailers like Wayfair, Casper, Best Buy, and Expedia. They offer loan terms of 3, 6, or 12 months, and their mobile app allows for easy financing and convenient monthly payments for big ticket items.

Klarna

Klarna is a Swedish company partnered with Lenovo and Overstock.com. It offers two different financing solutions:

  • An interest-free installment loan with loan terms spanning from 2 weeks to 1 month.
  • A credit line starting at 6 months.

Greensky

Greensky partners with nearly 17,000 active merchants to provide deferred-interest loans at the point of purchase. That means that GreenSky’s loans are interest-free for the length of the promotional period (six to 18 months). However, if you fail to pay the loan off within that period, you’ll owe retroactive interest on the original total cost.

Hybrid option: Online credit accounts

There are also a few contenders who got into the point-of-sale financing space early and who now provide their point-of-sale financing via online credit accounts. Amazon and PayPal are the two major players here.

Amazon

Getting an Amazon Store Card provides you access to 6, 12, and 24-month financing options. And as long as you pay off the purchase in full within the offer period, your purchase is totally interest-free. Once the offer period passes, though, you’ll have to pay interest on any remaining balance.

When using Amazon Credit to purchase qualifying electronics that cost $499 or more, your balance is interest-free for a year. That means that if you pay it off within a year, your purchase is fully interest-free.

PayPal

PayPal Credit is a credit line tied to your PayPal account. But unlike a regular credit card, the application for PayPal credit is incredibly simple. If you’re a current PayPal user applying for PayPal Credit, simply provide your birthday, your income (after taxes), and the last four digits of your Social Security number. You’ll find out in seconds if you’re approved!

They will run a credit check, but their requirements are lower than the average credit card. Plus, you can pay off your balances right from your PayPal account. And you can use PayPal Credit everywhere that PayPal is accepted.

With PayPal Credit, you’ll pay no interest on purchases of $99 or more as long as you pay them off in full within 6 months. And this isn’t an introductory offer — it’s permanent! Of course, you’ll still have to make minimum monthly payments. And for the rest of your balance, PayPal Credit charges 25.99% APR.

Is point-of-sale financing right for you?

Point-of-sale financing is definitely convenient. It doesn’t require you to have a credit card, and typically has lower eligibility requirements than the average credit account. However, all that flexibility and convenience comes at a cost. The interest rates of point-of-sale financing options are much higher than average — often 25-30%. And although many charge no interest for an introductory period, those interest rates skyrocket after the promotional period ends.

Not sure if point-of-sale financing is the right option for you? Consider the costs and benefits.

WEIGH THE RISKS & BENEFITS

Here is a list of the benefits and the drawbacks to consider.

Pros
  • Convenience.
  • Accessible to buyers with low or middling consumer credit.
  • Helps buyers with no credit card to split big purchases into smaller, more affordable payments.
Cons
  • High interest rates.
  • Makes it complicated to return items.
  • Enables over-spending, especially for buyers who have already hit their credit limit.

Getting started

Want to learn more about point-of-sale financing? Or are you a vendor interested in setting up point-of-sale financing for your business? Check out SuperMoney’s financing solution here! Joining our network is completely free.