How Klarna Works

Buy now, pay later is an increasingly popular way for consumers to shop online or in stores. According to one survey, 39% of consumers have used these short-term, point-of-sale installment loans at some point. Klarna is one of several online platforms that provide this type of financing.

Founded in Sweden in 2005, the company now serves an estimated 90 million customers, with two million transactions processed per day.

Key Takeaways

  • Klarna offers several point-of-sale installment loan options for shoppers.
  • Shoppers can pay back their loans interest free over 30 days or in four installments.
  • Shoppers also have the option to finance their purchases over six to 36 months and pay interest.

How Does Klarna Work?

Klarna is a buy now, pay later service designed primarily for online purchases. You can use the Klarna mobile app anywhere online or choose Klarna as your payment option at checkout with participating retailers.

There are no interest payments unless you choose to finance your purchase, and there are multiple ways to repay what you owe.

For instance, you can pay off the entire purchase in 30 days (Pay in 30 Days) interest free, pay it in four interest-free installments (Pay in 4), or finance it over a period of six to 36 months.

Klarna requires a minimum purchase of $10. There’s no set credit limit. Instead, the user can check “Purchase Power” on the app to get an estimate of the current amount that can be spent. The limit is based on factors such as payment history and balance size.

Generally, the more often you use Klarna to pay and repay it promptly, the larger your Purchase Power will grow.

Here are the answers to some other common questions about how Klarna works.

Can You Use Klarna to Pay Bills?

No. While some buy now, pay later financing platforms might allow for bill payment, Klarna is designed strictly for shopping.

Does Klarna Affect My Credit Score?

Short-term financing options like buy now, pay later can have an impact on your credit score. Your credit may be affected when you apply, as you make loan payments, or if you happen to miss a payment.

Klarna does not specify whether it reports payments to any of the three major credit bureaus. But it’s possible that if you miss a payment or default on a payment agreement, that might be reported. Also, Klarna may assign your account to a debt collection agency to recover any outstanding amounts that you owe.

Does Klarna Check Your Credit When You Use It?

Klarna can check your credit as you use it. Whether this involves a soft or hard credit check depends on which payment option you choose.

If you choose the Pay in 4 option, with loans split into four installment payments, Klarna will use a soft credit pull. If you’re interested in monthly financing with Klarna, then a hard credit check may be required.

A soft credit check will have no impact on your credit score, while a hard credit check can have a small negative impact.

Can You Get Klarna if You Don’t Have a Credit Card?

Not having a credit card isn’t a barrier to qualification as long as you have a sufficient credit history for a soft or hard credit check.

While Klarna can look at your credit, it also considers other factors when making approval decisions. You might be turned down if, for example, you’ve made too many purchase requests in a short period of time, or you have a poor payment history for previous Klarna loans.

Rejections don’t negatively affect your credit score. And even if you’re denied Klarna financing once, it’s possible that you could be approved at another time.

Does Klarna Charge Interest and Fees?

Klarna charges no interest when you choose the Pay in 4 or Pay in 30 Days options. Both of these buy now, pay later loans are interest-free as long as you pay what you owe in full within the allotted time frame.

You may, however, pay interest charges if you use one of Klarna’s financing options. This includes month-to-month financing or planned payments. The annual percentage rate (APR) for purchases is between 0-24.99%. You may be able to avoid interest if you’re eligible for a No Interest If Paid In Full promotional offer.

Klarna can charge fees if you miss a payment. A fee of $7 applies the second time Klarna tries and fails to collect payment from you.

Is Klarna Safe?

Klarna says it takes customer security seriously and uses a variety of measures to protect your information. That includes computer safeguards, secured files, and the use of secure buildings to store servers.

How Do I Pay Klarna?

When it’s time to make payments to Klarna, you have several options. Klarna accepts all major debit and credit cards, including Mastercard, Visa, American Express, and Discover.

Klarna does not accept prepaid cards as a form of payment. You can make payments manually through the Klarna app or schedule automatic payments.

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