Buy Now Pay Later True Cost Calculator
Buy Now Pay Later True Cost Calculator
What a buy now, pay later plan really costs: the total you pay, how much more than the cash price, and the effective annual rate once fees and late fees are counted — even on a “no-cost” plan.
BNPL true cost
$30,000 in 3 monthly instalments, the first at checkout, 0% interest, a $299 fee, nothing late
Total cost and the effective annual rate
Find x: price − fee − (paid at checkout) = Σ (instalment + late fee)k × (1 + x)−k
APR = x × periods a year; compounded = (1 + x)periods − 1
- instalment
- price ÷ n at 0%; otherwise the level payment at rate ÷ periods a year on the reducing balance
- k
- the instalments after checkout, one period apart
- x
- the cost per period, found by 40 halvings of an interval proven to contain it (0 to the largest instalment ÷ the credit received); accurate to better than 0.000002 percentage points
Worked example
$30,000 in 3 monthly instalments, the first at checkout, 0% interest, a $299 fee, nothing late
Instalments = 30,000 ÷ 3 = $10,000; total = 3 × 10,000 + 299 = $30,299
Cost over the cash price = $299, 1.00% of the price
Credit actually received: 30,000 − 299 − 10,000 paid at checkout = $19,701, repaid by 10,000 after one and two months
That is 1.010% a month: an APR of 12.1%, 12.8% compounded
The same 30,000 purchase and 299 fee on different plans
| Plan | Cost over the price | APR | Compounded |
|---|---|---|---|
| 3 monthly, first at checkout | $299 | 12.1% | 12.8% |
| 3 monthly, first a month later | $299 | 6.0% | 6.2% |
| 4 fortnightly, first at checkout | $299 | 17.5% | 19.0% |
| 6 monthly at 16%, first a month later | $1,714 | 19.5% | 21.4% |
| 3 monthly, one instalment late | $549 | 22.1% | 24.5% |
What “no-cost” buy now, pay later really costs
Buy now, pay later splits a purchase into a few instalments, fortnightly or monthly, often with no interest. The cost sits elsewhere: a convenience or processing fee, interest on longer plans, and late fees if an instalment is missed. In the example the plan costs $299 over the cash price, only 1.00% — but the credit lasts two months, and a third of the price is paid at checkout, so as an annual rate it is 12.1%. The same fee with the first instalment a month later is 6.0%; one late instalment takes it to 22.1%.
What lenders in India must tell you. Where a pay-later plan is a loan from a bank or NBFC made through an app, RBI’s Digital Lending Directions, 2025 apply. The lender must give a Key Facts Statement before you sign, with an annual percentage rate that includes interest and all other charges, and cannot charge a fee that is not in it without your explicit consent; fees due to the app or other lending service provider are paid by the lender, not collected from you separately; and you can exit during a cooling-off period of at least a day by repaying the principal and the proportionate APR. Card EMI schemes are outside these rules and covered by the credit card directions instead. RBI folded these rules into consolidated directions for each type of lender in November 2025. Plans run by a merchant, or outside India, may carry no such disclosure: work the figure out yourself here.
Before you use one. Instalments across several plans add up quickly, and each one is a credit line that can be reported to credit bureaus, so a missed instalment can hurt your credit record as well as cost a fee. Compare the APR with a card’s own EMI offer using the credit card EMI conversion calculator, and check that the instalments fit your budget calculator. If paying in full gets a discount, that discount is a cost of the plan too. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
Is buy now pay later really interest-free?
Often there is no interest, but a convenience fee or late fees are a cost of credit all the same. A $299 fee on $30,000 over three months is an APR of 12.1% in the example.
How is the effective annual cost of BNPL calculated?
Find the rate per period at which the instalments and late fees repay the price less the fee and anything paid at checkout, then multiply by 26 for fortnightly or 12 for monthly plans — the APR convention of RBI’s Key Facts Statement.
Do RBI rules apply to BNPL?
When the plan is a digital loan from a bank or NBFC, yes: a Key Facts Statement with an all-inclusive APR, no charges outside it without consent, and a cooling-off period of at least a day. The 2025 Digital Lending Directions do not mention BNPL by name.
What happens if I miss a BNPL instalment?
A late fee, and it may be reported to credit bureaus. In the example one late instalment adds $250 and raises the APR to 22.1%.
Related calculators
References
- Reserve Bank of India. Reserve Bank of India (Digital Lending) Directions, 2025. RBI/2025-26/36, DOR.STR.REC.19/21.07.001/2025-26, 8 May 2025: para 8 (Key Facts Statement per the April 2024 KFS circular; APR as defined there), para 9(iv) (fees payable to lending service providers paid by the regulated entity, not charged to borrowers separately), para 10 (cooling-off period of at least one day to exit on paying the principal and the proportionate APR), para 29 (EMI programmes on credit cards excluded). The Directions do not use the term “buy now pay later”. Consolidated into entity-wise Master Directions on 28 November 2025. https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12848&Mode=0
- Reserve Bank of India. Key Facts Statement (KFS) for Loans & Advances. RBI/2024-25/18, DOR.STR.REC.13/13.03.00/2024-25, 15 April 2024: the Annual Percentage Rate (APR) is “the annual cost of credit to the borrower which includes interest rate and all other charges”; its illustration computes APR on the net disbursed amount by the IRR approach (20,000 at 15% for 24 months with 400 of fees: 17.07%); fees not in the KFS cannot be charged without the borrower’s explicit consent.
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. McGraw-Hill. The present value of an annuity, from which the level-payment loan formula, its balance after any number of payments and its inverse for the number of payments follow.