Financing Your Home Improvement Project: Does Home Depot Accept Buy Now Pay Later Services Like Klarna?

If you‘re a homeowner, you know that maintaining and upgrading your space can get expensive quickly. A minor kitchen remodel averages $26,214, while replacing an HVAC system can cost upwards of $7,000, according to HomeAdvisor. For many consumers, coming up with that much cash upfront is a challenge. That‘s where "buy now pay later" (BNPL) services come in.

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BNPL apps like Klarna, Afterpay, and Affirm have surged in popularity recently, especially among younger shoppers. These platforms allow you to split up a purchase into smaller installment payments, often with no interest or fees (as long as you pay on time). In 2021, BNPL accounted for $97 billion in global e-commerce transactions, a figure that‘s expected to double by 2024.

Naturally, many cost-conscious consumers are wondering if they can use BNPL to finance their home improvement projects. Home Depot, the largest home improvement retailer in the U.S., does accept some BNPL options — but not all. Here‘s a closer look at which services you can use at Home Depot, how they compare, and some expert tips on using BNPL wisely for your renovation needs.

Can You Use Klarna, Affirm or Afterpay at Home Depot?

Let‘s cut to the chase: Home Depot currently accepts three BNPL services in-store and online:

  • Klarna
  • QuadPay
  • PayPal Pay in 4

However, Home Depot does not take some other popular BNPL options, including:

  • Affirm
  • Afterpay
  • Sezzle

So if you‘re set on using one of those services, you‘ll need to shop elsewhere for your home improvement supplies.

How Does Klarna Work at Home Depot?

Out of the BNPL options that Home Depot does accept, Klarna is probably the most well-known. The Swedish fintech company has over 147 million active users globally and partners with major retailers like Macy‘s, Sephora, and Etsy.

Here‘s how Klarna works at Home Depot:

  1. Shop in-store or online and add items to your cart as usual. Not everything is eligible for Klarna financing, so check for the logo or text on the product page.

  2. At checkout, select Klarna as your payment method. You‘ll be prompted to apply for a Klarna account if you don‘t already have one. This involves a soft credit check that won‘t impact your score.

  3. If approved, Klarna will present your payment plan options. For Home Depot purchases, this is typically four interest-free installments due every two weeks. So a $400 drill would be split into four $100 payments.

  4. Finalize your purchase and Klarna will charge your first installment immediately. The remaining payments will be automatically charged to your linked payment method every two weeks until the balance is paid.

  5. Manage your payments, due dates, and account information through the Klarna app or website. You can also enable autopay so you never miss an installment.

Klarna doesn‘t charge any interest or fees for its "Pay in 4" plan as long as you make your payments on time. However, late or missed payments can incur a fee of up to $7 and may be reported to the credit bureaus, damaging your score.

It‘s also important to note that just because you‘re approved for Klarna once doesn‘t guarantee approval for future purchases. Klarna performs a new soft credit check each time you try to use the service, and your spending limit may vary based on your history and current financial situation.

QuadPay and PayPal Pay in 4: How Do They Compare to Klarna?

In addition to Klarna, Home Depot shoppers can opt for QuadPay or PayPal Pay in 4 at checkout. These BNPL services work very similarly:

  • QuadPay is owned by Australian company Zip. It offers four interest-free installments due every two weeks, with no hard credit check required for approval. Late payments incur a fee of $5, $7, or $10 depending on your state.

  • PayPal Pay in 4 is PayPal‘s version of a BNPL service. As the name suggests, it splits your purchase into four equal payments due every two weeks. There are no late fees, but missed payments may be reported to the credit bureaus. You‘ll need a PayPal account in good standing to use this option.

All three services are generally available for purchases between $30 and $1,500, although Klarna and QuadPay may offer higher spending limits for some users. They also all perform soft credit checks with each new purchase attempt, so approval isn‘t guaranteed.

Which one should you choose? Ultimately, it comes down to personal preference and which app interface you find easiest to navigate. If you already have a PayPal account, the Pay in 4 option may be the most seamless. But in terms of interest, fees, and credit impact, Klarna, QuadPay and PayPal Pay in 4 are nearly identical.

Using BNPL for Home Depot Purchases: What You Need to Know

Before you whip out your smartphone to apply for a BNPL plan, there are a few key things to consider:

Restricted Items and Purchases

While you can use Klarna and other BNPL services on most merchandise sold by Home Depot, there are some notable exclusions:

  • Major appliances like refrigerators, ovens, and washing machines
  • Custom or special order items
  • Professional installation and home services
  • Gift cards
  • Clearance and reduced price items

Basically, if it‘s a big-ticket item or a service rather than a physical product, it‘s probably not eligible for BNPL financing. This is because Home Depot wants to limit its risk on expensive purchases and ensure it gets paid upfront for custom orders and installation labor.

Potential Impact on Your Budget and Credit

The appeal of BNPL is obvious: You can bring home that new patio furniture set or power washer today, then pay for it in small chunks over time. For disciplined shoppers, this "layaway" model can be a helpful budgeting tool to spread out large expenses.

But BNPL also makes it very easy to overspend and rack up debt quickly. A 2021 survey by Lending Tree found that 42% of BNPL users have made a late payment, and 70% of those saw their credit score drop as a result. The most common reasons cited were having too many payments to keep track of or just plain forgetting.

Even if a BNPL service advertises "no interest," there are still costs associated with using it. On the consumer side, most BNPL apps charge hefty late or missed payment fees that can add up fast. And on the retailer side, the cost of offering these payment plans is often baked into product prices, meaning you may pay more than someone who uses cash or a debit card.

There‘s also the risk of taking on more than you can realistically pay back. Let‘s say you finance a $1,200 refrigerator with Klarna. That‘s $300 charged to your card or bank account every two weeks for two months — a significant chunk of change. If an unexpected expense pops up or you lose income suddenly, those installments can quickly become unmanageable.

Alternatives to BNPL Financing

If you‘re not comfortable with the risks of BNPL or simply want to explore other financing options, here are a few alternatives to consider for your home improvement project:

  1. 0% APR credit card: Some credit cards offer an introductory period (usually 12-18 months) with no interest charges on purchases. If you can pay off your renovation expenses within that window, you‘re essentially getting an interest-free loan. Just be sure to make your payments on time and in full each month.

  2. Personal loan: For larger projects, a personal loan from a bank or credit union may be a better fit than BNPL. You‘ll get a fixed interest rate, set monthly payments, and a clear payoff timeline. And since personal loans are installment debt, they tend to have less of a negative impact on your credit score than revolving debt like credit cards.

  3. In-store financing: Many home improvement stores, including Home Depot, offer their own credit cards and financing programs. These often come with special perks like 0% interest promotions, cash back rewards, or exclusive sales. However, retail cards tend to have higher interest rates than general purpose cards, so you‘ll want to pay off your balance quickly.

  4. Cash savings: Of course, the simplest way to pay for a home improvement project is with good old-fashioned cash. By setting aside money each month in a dedicated savings account, you can avoid financing fees and debt altogether. It may take longer to reach your goal, but you‘ll have the peace of mind of knowing you can afford the project outright.

Expert Tips for Using BNPL Responsibly

If you do decide to use a BNPL service for your Home Depot purchases, follow these tips to stay on track:

  1. Stick to a budget: Before you start shopping, determine how much you can realistically afford to spend on your project and still make your installment payments. Don‘t let the ease of BNPL lure you into overextending yourself.

  2. Read the fine print: Familiarize yourself with the terms and conditions of your chosen BNPL service, including any interest charges, fees, and credit reporting policies. Don‘t assume they‘re all the same.

  3. Set payment reminders: Mark your installment due dates on a calendar or set up notifications on your phone. Better yet, enable autopay so you never accidentally miss a payment.

  4. Avoid using multiple BNPL services: It‘s easy to lose track of payments when you‘re juggling multiple financing plans at once. Try to limit yourself to one BNPL service at a time, and don‘t use it for every purchase.

  5. Have a payoff plan: Treat your BNPL plan like any other debt obligation. Make room in your budget for the installment payments and aim to pay off your balance as quickly as possible to avoid lingering debt.

By following these guidelines and using BNPL sparingly, you can take advantage of its flexibility without jeopardizing your financial health.

The Future of BNPL in Home Improvement

As BNPL continues to gain steam with consumers, we can expect to see more home improvement retailers jump on the bandwagon. Lowe‘s, for example, recently announced a partnership with Afterpay to offer its "Pay in 4" plan both online and in-store.

However, some experts worry that the rapid growth of BNPL could lead to a bubble, with consumers taking on more debt than they can handle. A recent survey by C+R Research found that 59% of BNPL users have used the service to purchase something they couldn‘t afford, and 56% have experienced buyer‘s remorse.

There are also regulatory concerns around BNPL, as these services don‘t have the same consumer protections as traditional credit cards. The Consumer Financial Protection Bureau recently opened an inquiry into major BNPL companies to gather data on their business practices and risks to borrowers.

As the BNPL landscape evolves, it will be important for consumers to stay informed and use these services responsibly. While BNPL can be a useful tool for making home improvements more affordable, it‘s not a substitute for smart budgeting and saving. As with any financial decision, weigh the pros and cons carefully and don‘t borrow more than you can reasonably pay back.

With a little planning and discipline, you can harness the power of BNPL to transform your home without breaking the bank. Whether you‘re using Klarna to finance a new backsplash or saving up cash for a full kitchen remodel, the key is to approach your project with a clear budget and a sound repayment strategy. By doing so, you‘ll be well on your way to the home of your dreams — one responsible purchase at a time.