More buyers using ‘Buy Now, Pay Later’ service options
DENVER (KDVR) – Buy now, pay later services continue to gain popularity among online consumers.
A recent Credit Karma survey found that about 44% of shoppers were using a Buy Now, Pay Later option to acquire an item they needed during the pandemic.
A LendingTree study found that two-thirds of consumers who used a BNPL service said they spent more on items than they normally would.
âOf those who have used these loans, about half say they have used them at least five times. It is very often, âsaid Matt Schulz, chief credit analyst at LendingTree.
Typically, BNPL services break down the cost of an item into four loans that you pay in equal installments over a period of several (usually six) weeks.
Financial experts tell problem solvers that more often than not these services are worthless.
âWith some larger purchases, you can end up financing things for three months to 12 months. And these can be interest free, but they can also end up having interest rates of up to 25-30% which are competitive with credit cards. So it is very important that you understand what you are getting into before you apply, âsaid Schulz.
About one-third (34%) of consumers who have used Buy Now, Pay Later services report falling behind on one or more payments.
âA lot of these buy now and pay loans later by automatically writing your payment. And in some cases a credit card account, but usually it’s a checking account. And the more you take out, the more you have simultaneously, the harder it is to manage them to make sure you have enough money in your account to pay those bills, âadded Schulz.
According to experts, if you are in arrears with your payment, you will either be reported to a credit bureau or the company issuing the Buy Now loan, Pay Later will decide not to lend you any more money for future purchases.
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