What is Point of Sale Financing

Point of sale lending is a popular form of financing where shoppers can apply for a loan when they’re checking out, whether they’re paying online or in-store.¹ This lets customers split large purchases, like furniture and appliances, into smaller, more manageable payments. The customer gets what they need right away and repays the loan over weeks or months, typically paying between 0% to upwards of 30% interest in the process. Other benefits of point of sale consumer financing include transparent, easy-to-understand terms and a fast approval process.

The application process at checkout

To qualify for point of sale financing, you’ll need to complete a short application during checkout. Applications vary by lender. Zip requires you to provide basic information like your: 

• Birth date (to validate that you are at least 18 years old)

• Phone number

• Mailing address (to validate that you are a U.S. resident)

• Payment method, such as a valid credit card or debit card 

This information allows the lender to perform a soft credit check, which doesn’t affect your credit score when you apply for POS financing. 

If you’re approved, you can complete your purchase using POS financing, then make gradual repayments based on your installment plan.

Interest rates and fees

Different POS financing services charge different rates and fees, making it important  to read the terms and conditions of the loan application when you’re comparing providers. Some are totally interest-free, but others may charge interest rates that can range anywhere from 3% to more than 30%. Other than interest charges, common types of fees include late fees, monthly or annual fees, payment date change fees, and payment processing fees.

Some providers may offer a temporary interest-free period as a way to welcome new customers. The interest-free period, if applicable, usually lasts from six months to two years.

Repayment options

Point of sale financing plans vary in length and payment frequency, giving shoppers multiple options to choose from during checkout. Most allow shoppers to make a series of 4 or more monthly or biweekly payments, with only a small portion due at checkout. 

When you use Zip¹, you pay a percentage of the item’s cost at checkout. This percentage depends on whether you choose a 4-payment² or 8-payment³ installment plan. You pay this small percentage up-front while your virtual Zip card instantly covers the rest of your purchase. You’ll pay off the remaining balance with biweekly installments, with the flexibility to choose between a pay-in-4² or pay-in-8³ plan.

POS financing has both pros and cons, making it important to weigh the benefits against the potential drawbacks. Whether you’re a shopper or a business owner, here are a few points to consider.

Pros for consumers

Point of sale financing offers several benefits and advantages for consumers. Whether you prefer to shop online or in-store¹, here are some of the upsides to using a POS financing service: 

• Control over your budget. You can get what you need today, and spread out your payments over time. 

• Flexible payment terms. Zip gives you the flexibility to pay in 4² or 8³ installments, pay multiple installments at once, change your payment dates⁴, and more.

• Avoid high interest. Zip offers interest-free plans and other options,³ allowing you to buy today and pay later. 

Cons for consumers

While point of sale financing offers convenience and flexibility, it can also have a few drawbacks. Here are some potential pitfalls consumers should be aware of: 

• High interest rates for some services. Interest rates can vary based on several factors when you apply. The terms of your agreement will tell you what interest rates apply.³ 

• Potential harm to your credit score. Missed payments may be reported to the major credit bureaus, which can hurt your credit score and make it harder to qualify for favorable loan terms in the future.

Pros for businesses

Point-of-sale financing offers benefits for businesses as well as their customers. Here are some pros of POS financing for merchants: 

• POS financing drives more sales. Various studies have shown that POS financing increases sales by up to 32%. 

• Average order (AOV) increases. A recent McKinsey report noted that when businesses provide BNPL options for customers, their AOV may increase by as much as 87%. And depending on their shopping habits, anywhere from 56% to 73% of consumers report being more likely to purchase high-cost items when financing is available.   

More transactions are completed. Offering POS financing increases customers’ spending power, which translates to fewer abandoned carts and more completed transactions.

Cons for businesses

Here are a few potential pitfalls and challenges for businesses to consider when adopting BNPL: 

• Paying transaction fees. Merchants typically pay somewhere between 2% and 8% of the sale amount to the BNPL provider. There may also be a small flat fee per transaction, which is usually around $0.30. 

• Integrating with your system. To avoid delays and system errors, you’ll need to look for a BNPL service that can integrate seamlessly with your tech ecosystem.

Personal loans, also called installment loans, provide applicants with funds that can be used for a variety of uses at the borrower’s discretion, including medical emergencies, school supplies, home repairs, and other expenses. Point of sale financing is a type of personal loan, but is limited to a single purchase or transaction with a specific merchant. Eligibility criteria and loan approval times can vary by lender for both personal loans and POS financing.

POS financing has numerous use cases, from monthly bills and everyday purchases to big-ticket items like laptops and refrigerators. Here are some examples of how you can use point of sale financing to make different types of purchases.

Large purchases (electronics, furniture, etc.)

Point of sale financing gives you a way to make major purchases, without taking a major hit to your budget. By using POS financing, you can break big expenses into a manageable series of payments, putting you in control of your budget – POS financing can help you pay for appliances and electronics, furniture and home upgrades, travel expenses like plane tickets, the latest gaming systems, and more.

Small purchases (everyday items)

In past decades, point of sale financing was mainly used for high-cost items like vehicles and electronics. Today, POS is becoming a popular option with shoppers. A recent survey projects that POS financing will continue to grow in popularity at a rate of 12.3% year-over-year (YOY). Currently, there has been a shift toward more consumers using POS financing for small, everyday purchases, with buy now, pay later plans exploding in popularity. For example, you can use Zip’s¹ pay-in-4² or pay-in-8³ plans for items like clothing, groceries, meal delivery, rideshare services, beauty products, household bills, school supplies, and more.

Here are a few key factors to think about when you’re deciding which point of sale financing option is right for you:  

• Fees: What fees does the provider charge, and how frequently? 

• Flexibility: Does the provider offer multiple types of repayment plans to choose from, like Zip’s pay-in-4² and pay-in-8³ options?

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Compare interest rates and fees

When comparing POS financing options, make sure you pay special attention to their interest rates, service fees, late fees, and other potential costs. Zip offers interest-free point of sale financing that also incorporates a portion of a small origination fee in your initial payment, then split across your remaining installments.²  There are multiple strategies you can take to avoid late fees and make payments on-time, including signing up for email notifications.

Choose an Installment Plan

Zip provides the option to pay in 4² or 8³ installments over a period of 6 or 12 weeks respectively, giving you multiple ways to manage purchases interest-free. From holiday and back-to-school shopping, to covering life’s unexpected emergencies, Zip¹ makes it easy to get what you need. 

Is Zip POS financing interest-free?

Zip¹ comes with a flat service fee instead of charging interest, so you never have to worry about unexpected charges.

How do I qualify for Zip POS financing?

To qualify for point of sale financing with Zip, you must be a U.S. resident, 18 years of age or older. You’ll be required to provide some basic personal information like your SSN, birth date, phone number, and payment method.

Can I use Zip POS financing for any purchase?

More and more retailers are offering the option for online and in-store¹ customers to pay using point of sale financing at checkout. For example, you can use your Zip virtual card to shop brands like Apple, Sephora, Nike, H&M, Vrbo, Etsy, Expedia, The Home Depot, and more. Zip is also accepted by leading retailers like Amazon, Walmart, Costco, and Target, plus popular apps like Doordash, Uber, and Instacart.