Heidelberg. Anyone who uses the convenient installment purchase option from major payment services such as Paypal or Klarna when shopping during “Black Week” will have to dig deep into their pockets. It only takes a few clicks to finance purchases via the payment service providers. However, Klarna’s installment loans are 86 percent more expensive and PayPal’s are 51 percent more expensive than a conventional bank loan. This is the result of a current model calculation by the comparison portal Verivox.
Klarna financing makes the sofa set more expensive by almost 700 euros
A test purchase carried out by Verivox showed that Klarna charges the highest interest rate of 13.60 percent for installment financing with a term of two years. For a notebook worth 2,236 euros, the interest costs under these conditions add up to a total of 309 euros. Financing a sofa set for a purchase price of 4,099 euros incurs a total of 690 euros in interest. Paypal offers slightly cheaper interest rates of 10.99 percent, which leads to interest costs of 251 euros when purchasing a notebook. When it comes to living room furniture, the financing costs make the purchase more expensive by 561 euros.
“With just a few clicks, you can pay for your consumer wishes directly from your couch in installments. This is simple and convenient, but ultimately expensive. If you finance the required amount with a conventional installment loan, you pay significantly less interest,” advises Oliver Maier, managing director Verivox Finanzvergleich GmbH.
Installment loans up to 46 percent cheaper
Anyone who took out an installment loan through Verivox in October paid an average of 7.19 percent interest. In this way, you only have to pay a total of 166 euros in interest to finance the notebook. This corresponds to a saving of a third (34 percent) compared to financing via Paypal. The total cost of interest can even be reduced by around 50 percent (46.3 percent) compared to Klarna.
Klarna and Paypal are popular for small purchase amounts
Almost a quarter of those surveyed use buy-now-pay-later offers from Klarna or Paypal and finance their consumption on credit. The hurdles faced by providers are very low. The payment method is particularly popular for smaller purchases. Eight out of ten customers of payment service providers finance amounts of 1,000 euros or less. Schufa writes in its current risk and credit compass that around 42 percent of all newly taken out installment loans are now small loans under 1,000 euros. Young people in particular pay conveniently with a click of the mouse and use this to take out micro-loans. Almost one in three (32 percent) aged 18 to 39 pays for purchases through buy-now-pay-later specialists. However, many parallel financings increase the running costs. Consumers can quickly lose track of their own finances. Even one unsuccessful debit leads to a negative Schufa entry.
“Many consumers are not aware that even small financing via payment service providers such as Klarna and Paypal essentially represent a loan and are noted in Schufa,” says Oliver Maier. “Many banks consider those interested in getting a loan who have multiple monthly installment debits to be less creditworthy. This makes it even more difficult for those affected to obtain a loan if they later want financing.”
Klarna and Paypal customers particularly often buy on credit
A good fifth of Paypal and Klarna customers have already used the provider’s installment financing six or more times. One in ten people have done this more than ten times.
“If you have several financing options running at the same time, it is advisable to bundle them into a single, affordable installment loan. In this way, borrowers save interest and at the same time keep a better eye on their expenses,” recommends Oliver Maier.
methodology
For the analysis, Verivox researched the financing conditions offered by Klarna and Paypal for two sample installment purchases with a 24-month term. The financing conditions for the same products were collected from both payment services (accessed on November 8, 2023). For the calculation, installment financing with a fixed term and constant monthly installments were compared.
All installment loans that were taken out via Verivox in October 2023 were included in the evaluation. The so-called median interest rate was evaluated. It is representative of borrowers with average creditworthiness. Half of all Verivox customers have taken out their loan at this interest rate or cheaper. All euro amounts stated are rounded to a whole euro.
For the survey commissioned by Verivox, the opinion research institute Innofact surveyed a total of 1,008 people between the ages of 18 and 79 online in August 2023. The respondents come from an ISO-certified online panel with around 500,000 participants. The survey is representative of the population in terms of age, gender and federal state affiliation.
The question was: 1) Have you ever used one or more of the following installment financing options? Please note: This question only concerns consumer financing (e.g. cars, furniture, travel or clothing) and not real estate loans. 2) Think about your BNPL financing: What was the amount of money financed? 3) Overall, how many times have you used BNPL financing?