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Credit Health and Money Insights

BNPL or Personal Loan: How to Choose the Right Option for You

Last updated Aug 25, 2025

If you're planning a big purchase and considering how to pay for it, you’ve likely asked yourself which is better: buy now, pay later (BNPL) or personal loan? While both options help spread out payments over time, the right choice depends on your financial situation, repayment ability, and long-term goals. 

We’ll explore a few of these differences and provide a framework that can help you decide if BNPL (buy now, pay later) or a personal loan is better for your purchase. 

woman sitting in front of a laptop considering her options

BNPL: Buy Now, Pay Later

BNPL is a payment option offered by some travel and retail companies that allows you to break up a purchase into smaller installments, which may be subject to fees and/or interest, depending on the provider. It’s generally offered only at checkout, making it a convenient and quick way to make a purchase without paying for it all upfront. 

Personal Loans

Personal loans are installment loans that allow you to borrow a fixed amount in one lump sum, through a lender. Unlike traditional credit cards which generally have variable interest rates and no fixed payment term, personal loans generally come with a fixed rate and term. That means you have a finite period of time to pay it back and can circle the date on your calendar for when it will be paid off. After your loan is approved, you'll receive a lump sum up front, or paid to a third party creditor for certain debt consolidation or credit card refinance personal loans, and then make monthly payments until the loan is paid in full. 

How Each Option Affects Your Credit Score

One key difference between buy now, pay later and personal loans is how they affect your credit score. Most BNPL services do not currently report to credit bureaus unless you miss a payment, or even at all. However, FICO announced it will soon start factoring in BNPL into a few of its credit scoring products. For now, though, responsible BNPL use and on-time repayments may not boost your credit score, but late payments could hurt it. 

Personal loans, by contrast, usually require a credit check, and the loan amount and repayments are reported to all three major credit bureaus. That means consistent, on-time payments can help improve your credit score, while late payments can hurt your credit score.

When to Use Buy Now, Pay Later (BNPL)

Buy Now, Pay Later is typically designed for quick, flexible financing, usually on relatively smaller purchases. Most BNPL providers allow you to split your total cost into 4-6 payments over a short period. The repayment period can vary depending on the BNPL provider, but a typical period is anywhere from 6 weeks to a few months.

BNPL can be a smart choice if:

  • The total cost of your purchase is under $1,000
  • You can repay it quickly without missing payments
  • You prefer a fast, low-friction application process
  • You don’t need long-term financing or credit-building benefits

Keep in mind that if you miss a payment, you could face late fees or negative marks on your credit, depending on the provider. Because it can be easy to get approved, BNPL can lead to overspending if you’re not careful. Creating a BNPL budget can help you keep your finances on track. 

When a Personal Loan Makes More Sense

A personal loan offers fixed payments over a longer term, typically 12 to 60 months. A personal loan may be the better option if:

BNPL vs. Personal Loan: Which Is Best?

Before you decide between BNPL and a personal loan, compare interest rates, fees, and the total cost of borrowing. Be honest about your ability to repay, and choose the option that supports your financial health. Learn more about Flex Pay, Upgrade’s BNPL product, and personal loans through Upgrade. 

*Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 7.99%-35.99% and a 1.85%-9.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For certain discounts, collateral may be required. Repayment terms from 24 to 84 months. For example, if you receive a $10,000 unsecured loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR and other terms of your loan may vary and you may not be presented with multiple offers. If offered, your loan terms, including your rate, will depend on credit score, credit usage history, loan amount, and other factors. Late payments or other fees, as noted in your Borrower Agreement, may increase the cost of your fixed rate loan. Certain loan offers may not be available in all states.

For U.S. customers: Down payment may be required. Actual terms are based on your credit score and other factors and may vary. APRs range from 0% to 36%. Minimum purchase may be required. Not everyone is eligible. Loans made through Flex Pay by Upgrade are offered by these lending partners: https://upgrade.com/flex-pay/lenders/. https://upgrade.com/flex-pay/privacy/. https://upgrade.com/flex-pay/terms/. Flex Pay’s Address: 275 Battery St 23rd floor, San Francisco, CA 94111

For Canadian customers: Down payment may be required. Actual terms are based on your credit score and other factors and may vary. APRs range from 0% to 34.99%. Minimum purchase may be required. Not everyone is eligible. Applicants are subject to approval by Uplift Canada Services ULC, a subsidiary of Upgrade, Inc. Upgrade.com/flexpay/en-ca/privacy. Upgrade.com/flexpay/en-ca/terms. Address: 410 Adelaide Street West, Suite 220, Toronto, Ontario M5V1S8

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