Until recently, if you wanted to buy something you couldn’t afford upfront, you reached for a credit card or took out a loan. Now, when you get to the checkout, you are likely to be faced with other options, including buy now, pay later (BNPL).

With so many ways to borrow, the true costs and complexities aren’t always clear. Which option will actually save you the most money in the long run? And how might each option affect your credit score? We spoke to financial experts to get some answers.

£100

At this level, the cost depends on how quickly you repay it, says James Caldwell, director of Clifton Private Finance.

“If you use a credit card and clear the balance within the same billing cycle, it costs nothing,” he says. But if you take longer to repay, unless you have a 0% on purchases deal, the costs can rise quickly. With many credit cards typically charging interest at about 36% APR, you could end up paying £15 to £20 in interest on top of the original £100.

BNPL options are typically interest-free and fee-free, but Caldwell warns: “Used carefully, they can be cost-neutral, but if payments are missed, late fees or interest can quickly apply.”

For example, at Klarna, a £5 fee will be charged for late payments after a seven-day grace period. PayPal’s Pay in 3 does not charge late fees, but missed payments can make your account overdue and prevent further use.

Whatever option you choose, Caldwell says it is best to repay quickly. Carrying even small balances for long periods can increase your credit utilisation ratio, which is one of the factors used to calculate your credit score.

£2,000

For a purchase of this size, BNPL could still be a suitable option. Borrowing limits vary between providers and are often tailored to the individual.

Klarna says it makes a decision on how much you can spend each time you use it. With PayPal Pay in 3, purchases of up to £3,000 can be split into three payments.

Dan Kellett, the director of lending and analytics at Carmoola, a car finance provider, says that whether you should borrow this sort of amount through BNPL depends on your ability to repay it within the agreed period.

“In a situation where you have a clear line of sight to paying it back regularly, BNPL can be a good way of doing it,” he says. However, if you want stronger protection against something going wrong, – for example, when paying for a holiday – a credit card may be a better option because of the safety net offered under section 75 of the Consumer Credit Act.

Many BNPL providers now report to credit agencies so, as with credit card borrowing, missed repayments can tarnish your credit score.

£10,000

For larger borrowing needs, personal loans typically offer far lower interest rates than revolving credit [where your available credit replenishes as you repay] such as cards or BNPL services, says Caldwell.

Using a credit card for £10,000 would usually “be one of the most expensive ways to borrow”, he says. At an APR of about 30-36%, the interest over five years could easily exceed £8,000, depending on how quickly the balance was repaid.

On a £10,000 loan over five years at roughly 7-8% interest, the total interest paid could be in the region of £1,800 to £2,200, Caldwell estimates.

Loan rates vary depending on your credit profile, but many mainstream lenders currently offer them in the 6-10% APR range “for strong borrowers”, Caldwell says. At the time of writing, the cheapest personal loan providers included TSB, which was offering a rate of 5.6% APR for loans of between £7,500 and £25,000.

Some retailers offer loans. “Then it comes down to being aware of the APR,” Kellett says, adding that you should shop around and see if you can find a better interest rate than the one being offered.

From a credit score perspective, Caldwell says how you use these products matters just as much as which one you choose. “Making payments on time can help build your credit history, while missed payments, maxed-out credit limits or multiple applications in a short period can negatively impact your credit rating.”

£20,000

Let’s say you take out a £20,000 personal loan on an interest rate of 6%. If you took it out over five years, you would typically pay £3,199 in interest. Increase the term to seven years so you do not need to repay as much each month and you would typically repay £4,542 in interest.

“A structured loan has fixed monthly repayments, which makes budgeting easier,” he says. “Revolving credit [such as] cards can feel flexible, but that flexibility often leads to balances lingering far longer than intended.”

Larger borrowing also comes with additional charges that people sometimes miss, including arrangement fees, early repayment charges or late payment penalties.

Kellett says that for a large loan, borrowers should think carefully about what the money is for. “That might influence the type of loan. With car financing, for example, there is an asset you can secure the borrowing against,” he says.

“A secured lending route may therefore be better, as there is recourse if something happens. If it’s for home improvements or another one-off large purchase, then it’s worth shopping around to see what the best rate you can get elsewhere is.

“Many lenders now use quotation searches that don’t affect your credit score but give you an indication of whether you are likely to be accepted,” he says. “It allows you to find out what is available to you without any detriment to your credit file.”