Klarna explain what happens if you can't make a payment
One of the most popular BNPL apps is Klarna with 15 million UK users since they launched in 2014 and since then they have been at the heart of the credit world.
It works by conducting soft credit checks on shoppers and offering small loans to help them pay for items like clothes and gadgets.
Klarna has tracked the age of its users since 2018 when the average was 30 years old and it's now 33 with the fastest-growing demographic being 40 - 54-year-olds.
There has been rising concern about the impact of credit lenders on our long term finances but Klara said that their Pay in 30 and Pay in 3 products do not impact our credit scores.
If financial circumstances change it can spell disaster for loans no matter how small but unlike credit cards or other short term credit apps, you will only ever owe the cost of the original purchase made with Klarna.
We asked if this still applied if we cannot pay and Klarna laid out exactly what happens to their no interest promise.
Alex Marsh, Head of UK Klarna said: "A credit card is designed to get you into debt and keep you there, with interest. Klarna is designed to get you out of debt quickly with a clear payment schedule and no interest or fees."
He said that after a payment is made with Klarna’s Pay Later products, the following happens.
First, we send a confirmation on the day of the purchase notifying when payment is due. Then, as the due date approaches we send further notifications: 2 days before the due date in the case of Instalments and the day before in the case of Pay in 30.
On the due day itself, we send another reminder. At any time before the payment is due, consumers can snooze a payment to give them 10 more days.
After the due date, we continue to send multiple reminders to consumers that payment is due. All of these reminders are sent across multiple formats: email, SMS and notifications in our app.
If, after a period of several months, we still have not been able to contact the customer, we will engage a debt collection agency whose role is to continue to attempt to contact the customer.
For our Pay in 30 and Instalments products, we never sell the debt to debt collection agencies, we only engage them to continue to contact customers through alternate channels.
If, after debt collectors have been contacted, a customer fully pays for or returns an item, Klarna will inform the DCA about this and the claim will be withdrawn.
Finally, if they cannot get hold of someone who has an outstanding bill, Klarna will restrict access to the service until it is paid.
They said: "The customer would be blocked from using Klarna for 12 months.
"After that, the block is lifted but they would still need to be approved by our underwriting model which would most likely reject them unless there are significant positive factors which have changed."
How to use Klarna, Laybuy and Clearpay safely
If used responsibly, BNPL schemes can be quite advantageous.
Trusted consumer site Which? have some advice for how to use BNPL apps safely and effectively.
Set a spending limit: with so many different schemes it’s easy to lose track of all the mini-loans you’re taking out. Make sure you set a spending limit so these don’t spiral out of control.
Use reminders: taking out multiple loans with different providers can make it hard to know what to pay when. Use reminders to track when you need to make repayments.
Return unwanted items promptly: if you’re ordering multiple sizes or just a range of clothes to try before deciding what to keep, do your returns promptly to ensure your balance is updated before payment is due.
Don’t keep quiet: if you’re going to struggle to meet the repayments, contact the company. They may be able to freeze late fees or offer an alternative arrangement.
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