More than a quarter of consumers cannot afford their BNPL payments, survey finds

More than a quarter of consumers cannot afford their BNPL payments, survey finds

According to a recent survey, more than a quarter of consumers say they have trouble paying their Buy Now, Pay Later installments. (iStock)

Amid the increase in Buy Now, Pay Later (BNPL) transactions, a new investigation by debt relief firm DebtHammer claims that many consumers are unable to pay their payments.

BNPL is a financing method that allows consumers to break their purchases into smaller, more manageable interest-free payments, and well-known BNPL companies include Afterpay, Affirm, Sezzle, and Klarna. According to an Inside Intelligence reportthe global transaction volume for the BNPL service could reach $680 million by 2025.

DebtHammer’s survey found that 30% of respondents struggled to make their BNPL payments and therefore had to skip paying a bill for essentials – utilities, rent, mortgage, car, baby carriage – to avoid payment defaults.

“The consumer may not realize/remember that these are loans that need to be repaid, just like credit card purchases,” said Dr Lawrence White, a professor at the Stern School of Business in New York University. “If the consumer gets too deep in debt and has difficulty repaying these loans, they may incur late fees/penalties and suffer ‘hits’ to their credit rating.”

If you are looking for ways to pay off the debts accumulated using the services of the BNPL, you can consider taking out a personal loan. Visit Credible to make sure you get the best rate and the best lender for your needs without affecting your credit score.

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Why do consumers use BNPL?

According to DebtHammer’s survey, the most popular reason (42.40%) consumers used BNPL’s services was their inability to purchase items “without the payment plan”. The ability to take advantage of interest-free payments was also a popular reason (33.40%).

In the survey, Dr White said BNPL services are changing consumers’ spending habits, adding that some plans that do not require credit checks and “enable consumers with bad credit or thin credit lines to access installment credit.”

“Using the BNPL plan may not help the consumer establish their credit rating if the BNPL provider does not report these payments (in a timely manner) to a credit bureau,” he said.

More than a quarter of survey respondents (27.84%) said they used BNPL’s services because they urgently needed an item and they couldn’t wait to get the full amount for the item. pay.

If you are looking for an alternative to BNPL services when making a major purchase, consider a personal loan. With a personal loan, you can easily access the funds you need at a lower interest rate. Head over to Credible to compare rates and lenders and find a schedule that’s right for you.

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BNPL adds to debt fight for many Americans: survey

Dr. White noted in the survey that in order for consumers who use BNPL’s services to get back on track with their finances, there are steps they can take.

“Build a budget that takes into account your likely income and likely expenses and make sure the former exceeds the latter, so there’s room to pay off those debts,” he said.

The survey also indicated that respondents took advantage of BNPL for purchases ranging from $50 to $5,000, but the highest percentage (16.92%) was for purchases between $101 and $200.

Dr. John Hilston, professor of economics at Eastern Florida State College, added that one potential remedy for consumers struggling to repay BNPL installments is to contact the provider directly.

“Explain the issue and ask if the repayment terms can be changed. Perhaps the company would consider a longer term, lower monthly payment? Some companies might be willing to negotiate,” Hilston said.

More than half of DebtHammer’s survey respondents said they repaid more than one BNPL plan, and 22% actually said they regretted their decision to take advantage of any plan. But even consumers say they find it difficult to make their payments, they continue to use BNPL’s services at higher rates. The survey also found that almost half (45%) of respondents have subscribed to at least one BNPL plan, an increase from 41% in April 2021.

Consumers may consider a debt consolidation loan as a way to pay off BNPL-related debt. Visiting Credible can help you compare debt consolidation options to find the best personal loan rates for you, based on your credit score and credit history.

You have a financial question, but you don’t know who to contact? Email the Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.

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