What's The Deal With POS Loans?

What are point of sale loans? Point-of-sale (POS) loans have become increasingly popular in recent years. Effectively, these loans enable you to buy a product instantly and pay later. Credit cards have long offered this service, but POS loans are a good alternative for those that struggle to fully pay off credit card debt.

Throughout this article, we will define the POS loan meaning, its benefits, drawbacks, the differences compared with layaway and credit cards along with the top lenders you can borrow from.

POS Vs Layaway

With POS loans, you can buy a product immediately and pay for it in installments. Layaway works just in the opposite manner, where you reserve a product and pay for it over a period of time. You get the product delivered to you only after you have made all the installment payments.

These short-term credit agreements are ideal for people who want to buy large items like electrical appliances or furniture but do not have all the cash upfront. However, the option also potentially gives rise to poor spending habits that can contribute to spiraling debt.

How Are These Loans Different To Credit Cards?

A POS loan differs from credit cards in the following ways:

1. Credit cards can be used to buy almost anything, but POS credit is mostly only available at select retailers for certain products.
2. The borrowing amount depends on the product cost and not on your credit limit. Expect similar interest rates with both options. The funding is almost immediately available, just like credit cards.
3. The loan duration could be a few months or years, and you can even repay the loan early.
4. Your credit report only receives a soft inquiry, unlike a hard inquiry that usually comes with credit cards.
5. Point-of-sale lenders determine whether to issue loans per sale, protecting themselves from offering too much credit.

The Top POS Lenders

Some of the top lenders US consumers can borrow from include:

• Affirm - This lender offers credit with flexible payment schedules and does not charge any late fees or penalties.
• Afterpay - Access zero annual percentage interest rate loans spread across four equal installments, which you have to repay every two weeks.
• Klarna - Benefit from three interest-free installments, with the first one being upfront and the next two at a gap of 30 days each.
• Quadpay - Expect instant approvals on zero-interest loans split into four installments, which you have to repay in six weeks.
• Zebit - This company offers zero-interest credit without the need for any credit score or inquiries.

The Benefits

1. Point-of-sale credit can be an ideal option if you do not want to use your credit card.
2. POS loans allow for planning and budgeting. You always know how much you need to pay per month and have a fixed date to be free of the debt.
3. You do not necessarily need a good credit history, which makes it a good option if you want to make big purchases.

The Drawbacks

1. In some cases, interest rates can be as high as 30%.
2. It can be tempting to overspend just like credit cards, which could add financial stress.
3. Since lenders do not consider your financial history, borrowers are at risk of developing poor credit habits.
4. If you wish to return the product, you will have to contact the retailer instead of the lender. You might still have to pay off some of the loans to the lender.

Conclusion

Pursuing POS lending, just like credit cards, can be the right choice if you can already manage your finances well. With POS borrowing, you can make big purchases even if you do not have a strong credit history. All you need to ensure is that you make timely payments each month without going into debts.

While it might look very attractive, it is best to borrow only what you can afford without letting the extra debt affect your minimum monthly expenses. If you do run into debt issues, it is important to explore the many ways to get out of debt.