Guides

Overview

Buy Now Pay Later (BNPL) loans allow individuals to finance purchases for goods and services with fixed installments over a period of time. The primary difference between BNPL and traditional loans is that the loan principal is disbursed to the merchant or service provider rather than to the individual directly.

Here’s how a BNPL loan works:

  1. Credit Application: at checkout for a good or service, the purchaser has an option to finance the purchase with a BNPL loan.
  2. Payment Terms: the payment terms are similar to that of a loan, with installment payments due over a given period (ie monthly) and term (ie 12 months).
  3. Fees & Interest: BNPL loans can be zero interest / zero fee, but also commonly charge interest. Sometimes there is a processing or platform fee associated with the loan (typically a percentage of the loan principal).
  4. Disbursement: once a loan is accepted, the proceeds are disbursed to the merchant.

The Buy Now Pay Later Credit Application

To create a credit application for a BNPL loan, the third_party_disbursement_destination is required in the request and represents the merchant or service provider that the individual is financing the purchase with.

1// Example: Create application request body
2{
3  "borrower_id": "bor_9a73889c4a68431b87489d42d9560f75",
4  "credit_type": "consumer_bnpl",
5  "third_party_disbursement_destination": "Bass Pro Shop"
6}
7
8## The Buy Now Pay Later Offer
9
10Buy Now Pay Later Loans leverage the standard Loan Offer object, including the following primary parameters:
11
121. `amount`: the total purchase price the user is financing, in cents.
132. `interest_rate`: the interest rate on the loan, in basis points.
143. `payment_period`: the frequency of installment payments. Can be `monthly`, `weekly`, or `biweekly`.
154. `loan_term`: An object representing the number of payments.
16
17The following example models a loan offer with an amount of $1,000.00, 13% interest rate, monthly payment period and 12 payments:
18
19{
20  "amount": 100000,
21  "interest_rate": 1300,
22  "payment_period": "monthly",
23  "origination_fee": 0,
24  "late_payment_fee": 0,
25  "type": "loan_offer",
26  "loan_term": {
27    "term_type": "months",
28    "term": 12
29  }
30}

The Pier Loan Facility resource is the source of truth for the loan’s ledger details including the balance, interest accruals, and due dates.

1 {
2    "terms": {
3        "grace_period": {
4            "term": 0,
5            "interest_rate": 0
6        },
7        "loan_term": {
8            "term": 12,
9            "term_type": "months"
10        },
11        "amount": 2000000,
12        "apr": 1300,
13        "type": "loan_offer",
14        "interest_rate": 1300,
15        "late_payment_fee": 0,
16        "origination_fee": 0,
17        "payment_period": "monthly",
18        "periodic_payment": 178635,
19        "id": "off_d5e348293e42489cb1b70b47a49ea68f",
20        "interest_type": "fixed"
21    },
22    "id": "fac_46a10faf1d9442a1880d08814a90f670",
23    "application_id": "app_57ccbab39ac64428994839133b39d11c",
24    "borrower_id": "bor_9a78389c4a68431b87489d42d9560f75",
25    "loan_agreement_id": "doc_4f134b3862064833b37d61501aea2105",
26    "account_number": "540017027",
27    "credit_type": "consumer_bnpl",
28    "status": "active",
29    "autopay": {
30        "authorized": false
31    },
32    "balance": 2000000,
33    "interest_balance": 0,
34    "origination_date": "2023-12-13",
35    "disbursement_date": "2023-12-13",
36    "remaining_term": 12,
37    "payments_due": [],
38    "transactions": [],
39    "statements": [],
40    "created_on": "2023-12-13T23:13:54.619Z",
41    "amortization_schedule": [
42        {
43            "payment_date": "2024-01-13",
44            "interest_payment_amount": 21667,
45            "principal_payment_amount": 156968,
46            "other_payment_amount": 0,
47            "total_payment_amount": 178635,
48            "balance_amount": 1843032,
49            "item_index": 1
50        },
51        {
52            "payment_date": "2024-02-13",
53            "interest_payment_amount": 19966,
54            "principal_payment_amount": 158669,
55            "other_payment_amount": 0,
56            "total_payment_amount": 178635,
57            "balance_amount": 1684363,
58            "item_index": 2
59        },
60        {
61            "payment_date": "2024-03-13",
62            "interest_payment_amount": 18247,
63            "principal_payment_amount": 160388,
64            "other_payment_amount": 0,
65            "total_payment_amount": 178635,
66            "balance_amount": 1523975,
67            "item_index": 3
68        },
69        {
70            "payment_date": "2024-04-13",
71            "interest_payment_amount": 16510,
72            "principal_payment_amount": 162125,
73            "other_payment_amount": 0,
74            "total_payment_amount": 178635,
75            "balance_amount": 1361850,
76            "item_index": 4
77        },
78        {
79            "payment_date": "2024-05-13",
80            "interest_payment_amount": 14753,
81            "principal_payment_amount": 163882,
82            "other_payment_amount": 0,
83            "total_payment_amount": 178635,
84            "balance_amount": 1197968,
85            "item_index": 5
86        },
87        {
88            "payment_date": "2024-06-13",
89            "interest_payment_amount": 12978,
90            "principal_payment_amount": 165657,
91            "other_payment_amount": 0,
92            "total_payment_amount": 178635,
93            "balance_amount": 1032311,
94            "item_index": 6
95        },
96        {
97            "payment_date": "2024-07-13",
98            "interest_payment_amount": 11183,
99            "principal_payment_amount": 167452,
100            "other_payment_amount": 0,
101            "total_payment_amount": 178635,
102            "balance_amount": 864859,
103            "item_index": 7
104        },
105        {
106            "payment_date": "2024-08-13",
107            "interest_payment_amount": 9369,
108            "principal_payment_amount": 169266,
109            "other_payment_amount": 0,
110            "total_payment_amount": 178635,
111            "balance_amount": 695593,
112            "item_index": 8
113        },
114        {
115            "payment_date": "2024-09-13",
116            "interest_payment_amount": 7536,
117            "principal_payment_amount": 171099,
118            "other_payment_amount": 0,
119            "total_payment_amount": 178635,
120            "balance_amount": 524494,
121            "item_index": 9
122        },
123        {
124            "payment_date": "2024-10-13",
125            "interest_payment_amount": 5682,
126            "principal_payment_amount": 172953,
127            "other_payment_amount": 0,
128            "total_payment_amount": 178635,
129            "balance_amount": 351541,
130            "item_index": 10
131        },
132        {
133            "payment_date": "2024-11-13",
134            "interest_payment_amount": 3808,
135            "principal_payment_amount": 174827,
136            "other_payment_amount": 0,
137            "total_payment_amount": 178635,
138            "balance_amount": 176714,
139            "item_index": 11
140        },
141        {
142            "payment_date": "2024-12-13",
143            "interest_payment_amount": 1914,
144            "principal_payment_amount": 176714,
145            "other_payment_amount": 0,
146            "total_payment_amount": 178628,
147            "balance_amount": 0,
148            "item_index": 12
149        }
150    ],
151    "next_payment_amount": 178635,
152    "next_payment_due_date": "2024-01-13",
153    "current_payment_due_date": "2024-01-13",
154    "last_payment_date": null,
155    "payoff_balance": 2000000,
156    "principal_paid_thru": "2023-12-12",
157    "next_billing_date": "2024-01-03",
158    "interest_accrued_thru": "2023-12-12",
159    "next_accrual_cutoff_date": "2024-01-12",
160    "scheduled_payoff_date": "2024-12-13"
161}