Paying with finance: what does it mean?
Buying something on finance can be a way to spread the cost of a purchase. This could be anything from a replacement laptop to a new kitchen or even a car.
It’s like a loan, except that the money you borrow will not be sent to your bank account.
How does it work?
The process of paying on finance may vary between companies. Typically, you might be offered the choice to pay for an item using finance at the checkout, whether that’s in-store or online. Please note that not all merchants offer this payment method.
You’ll usually undergo some form of credit check before you’re approved for finance. It’s important to be aware that this could be a hard search, which will remain on your credit file for up to 12 months. Undergoing multiple hard searches in a short period of time will harm your credit score.
You might be asked to pay a percentage of the cost upfront, with the remaining balance paid at a later date in one lump sum or instalments.
Different ways to pay by finance
- Instalment plan
Let’s say you’re buying a new washing machine for the price of £300. The company you’re buying from offers the option to pay 25% of the cost upfront, and the rest in monthly instalments across a term of either 6, 12, or 18 months. Your monthly instalments will include interest, and the interest rate you’re offered is 44.9%. You choose a repayment term of 12 months. In this case, you’d pay £75 upfront, and around £23 each month, including interest, for 12 months.*
*Example for illustrative purposes only. We used this calculator. - Interest-free instalment plan
This type of finance usually comes with a promotional interest-free period. If you have not repaid the money you owe in full before the interest-free period comes to an end, your outstanding balance will begin to accrue interest at your standard rate. - Buy Now, Pay Later (BNPL)
BNPL companies include Klarna and Clearpay. While the BNPL market is currently mostly unregulated, this is set to change in 2026. As it currently stands, BNPL could put borrowers at risk of financial hardship. It’s crucial to protect yourself and your finances; remember, you should never spend money that you don’t need to, or that you can’t afford to repay.
Is buying on finance interest-free?
This will depend on the provider. As discussed, some providers may offer an interest-free plan, while others may charge interest. You’ll find full information in your terms and conditions, which you should read through carefully before signing.
If I buy something on finance, how long do I have to pay back the money?
Again, this will depend on the provider. Some may offer a set repayment period - for example, 6 weeks - while others could have a range of repayment terms to choose from.
Is paying on finance a good idea?
You should only ever consider paying on finance if you’re certain that you can afford it. You should never spend money that you don’t need to or can’t afford to repay.
There are certain things you should ask yourself before paying for a product or service on finance.
- Do I really need to spend money on this item/service?
- Can I afford it?
- Could this expense wait until I’ve saved the money instead?
- Could I borrow the item I need instead of buying it? This could be a good question to ask if it’s something like garden or home maintenance tools you need.
You should also make sure you understand the following before you sign any credit agreement:
- Will I be charged interest?
- Do I need to make a payment up-front?
- When do I need to pay the full amount by?
- If paying in instalments, how much will this be?
Am I eligible for finance?
Every finance provider will have their own eligibility criteria. Eligibility criteria will vary, but generally, you’ll need to be over the age of 18 with a bank account and debit card and able to demonstrate that you can afford to repay any money you borrow.
Alternatives to buying goods on finance
If you need to cover the cost of an urgent expense, such as an essential household item like a fridge or washing machine, you might wish to do some research into a personal loan instead.
If you’re approved for a personal loan, the money will be sent to your bank account, which can then be used to pay for the expense. You’ll pay back the money you owe in monthly instalments, which will include interest.
CashLady is a credit broker, and we could help you search for a short-term, personal loan from £100 to £10,000, with a repayment term between 3 and 60 months, depending on the amount of money you apply to borrow.
Can I search for a loan with CashLady?
You’re welcome to search for a loan with CashLady if you:
- Are over the age of 18;
- Are a UK resident;
- Have a UK bank account and a valid debit card; and
- Have a regular source of income paid into your bank account.
You can search for a loan with CashLady if you have bad credit. Several of the lenders on our panel specialise in loans for people with bad credit and could be willing to consider your application.
Search for a finance alternative loan with CashLady with no impact on your credit score
Searching for a loan with CashLady will not affect your credit score. We use soft search technology, which will only be visible on your credit file to you and us.
If we’re able to match you with a loan and you decide to make a full application with the lender, they will carry out a creditworthiness assessment to make sure that you’re able to afford to repay the money you’re applying to borrow. A creditworthiness assessment will include a hard search or Open Banking.
A hard search will remain on your credit file for up to 12 months, and multiple hard searches in a short period of time will damage your credit score.
I’m struggling with money; what can I do?
If you’re worried about money or debt, you can get free, confidential advice from any of the following organisations: MoneyHelper, Citizens Advice, and National Debtline.
CashLady and charity StepChange have put together this free Money Health Check quiz to signpost customers to support and solutions.