Estimates suggest that as many as one in 10 consumers who use buy now, pay later companies such as Klarna and Clearpay have debt collectors chasing them for repayments.
If you find yourself with a bill you cannot pay, one of the first consequences will be a late payment charge. In the UK, Klarna charges a £5 fee for late payments, but only after sending at least four ‘friendly reminders’ over a seven-day ‘grace period’. Each late fee is capped at 25% of the order value, with no more than two late fees per order.
If you miss a payment on its ‘pay after 30 days’ or ‘pay in three instalments’ products, the missed payment will not impact your credit score.
If you use Klarna’s ‘financing’ product, which does attract interest, any interest-free period or promotional rate will likely end when you miss a payment. You will then revert to the default rate of interest of 18.9%, which is equivalent to credit card borrowing. The missed payment will also be reported to the credit reference agencies and will negatively impact your credit score.
If you continue not to pay, Klarna may refer the debt to a debt collection agency. Klarna does not say exactly when this will happen, but it’s usually after a few months. At this point, you can expect the action taken against you to escalate. The debt collection agency may try to contact you to discuss the payment in writing, over the phone or in person.
If you still cannot pay, Klarna or the debt collector may take legal action against you and the court can order you to repay the debt plus interest and costs. At this point, your possessions and even your home could be at risk. Given the potential severity of the consequences, it’s important to take action and seek professional advice as soon as you realise you cannot pay.