A growing number of American shoppers have jumped at the chance to use “buy now, pay later” loans to pay for new sneakers, electronics, or luxury goods in installments
FILE - A 65-inch television is shown at a warehouse, Thursday, June 17, 2021, in Lone Tree, Colo. Buy now, pay later loans allow users to pay for items such as new sneakers, electronics or luxury goods in installments. NEW YORK — — Americans have grown fond of “buy now, pay later” services, but the “pay later” part is becoming increasingly difficult for some borrowers.
The most popular type of buy now, pay later loans allow for four payments over six weeks — one payment at the time of purchase and three others that borrowers often try to sync up with pay periods. Longer-term loans for bigger purchases are also available. Most of the short-term loans have no interest attached to them. Companies that do charge interest can clearly state upfront how much a borrower will pay in financial charges.
“I remember I just had a cartful,” she said. “At first, I thought, ‘Something’s gotta go back,’ and then I saw Afterpay at checkout – you don’t pay for it all right now, but you get it all right now. That was music to my ears.” Another concern among advisers and consumer advocates, as well as Washington lawmakers and regulators, is the ease with which consumers can layer on these installment loans.
“With zero to low-interest, flexible payment terms, and transparent terms and conditions, BNPL helps consumers manage their cash flow responsibly and live healthier financial lives,” said Penny Lee, CEO of the Financial Technology Association, in a statement. Meanwhile providers of buy now, pay later services see rising delinquencies as a natural consequence of growth, but also an indication that inflation is hitting Americans most likely to use these services the hardest.
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