Payments can also be added to Sales in the Checkout screen, see How do I checkout a Reservation?
Tap the + icon > Add Payment. The monetary value of the Loyalty Points accrued by this Customer will be displayed in the Loyalty Points button. Enter the amount you wish to pay with Loyalty Points, then tap the Loyalty Points button
The Loyalty Points Payment will appear in the Payments section of the Sale:
Alternatively, tap on the Loyalty Points shortcut button on the right hand side of the screen, in the Payments section:
Proceed with adding any other required actions, then close the Sale
Your Customers Loyalty Point balance will be adjusted once the Sale is closed (see How do I view a Customer's Loyalty Points?)