BOISE, Idaho — In the past year, nearly half of all Americans surveyed by Lending Tree say they’ve used a buy now, pay later service.
Buy now, pay later services or BNPL, works just like it sounds: you get the product now and pay for it later, usually in installments.
Whether they’re for must-have items or even groceries, people are turning to them as a bridge to their next paycheck. The problem is their convenience can come with a potential cost, especially when you begin using more than one.
“These loans have really exploded over the last few years from being kind of a novelty to being everywhere, and they’re really easy to get oftentimes,” said Matt Schulz, Chief Credit Analyst for Lending Tree, “so you can end up stacking these on top of each other and creating a bunch of debt in a pretty big hurry.”
One of the big draws of BNPL is the convenience, which is why they’ve become so popular, even with grocery shopping. Data shows a large number of Americans are relying on these loans to get by with about 27% of BNPL users say they use the loans as a bridge to their next paycheck.
Schulz says the problem is that these services could lead to more debt, and poor credit because some come with high-interest rates that hit the wallet hard if you don’t pay on time.
“If you do pay late if you don’t meet the terms of the loan, you can get hit with late fees, you could potentially have the late fee reported to a credit bureau, and with some of these lenders,” said Schulz, “you could even end up not being able to borrow from them again.”
So to avoid buying now and paying more later on, the financial experts at Lending Tree suggest you don’t overextend by having multiple BNPLs going at once, pay on time, and spend wisely.
The Idaho Department of Finance also suggests you review all terms and conditions and consider your ability to repay the loan to avoid adding more debt than you can reasonably afford.
