Since the start of the pandemic, the option to 'buy now, pay later' has skyrocketed in popularity, especially among young and low-income consumers who may not have ready access to traditional credit.
"Buy now, pay later" loans, or BNPLs, have become incredibly popular, up 230% in the last two years. Nina Pineda has the lowdown.
"You have an industry with a higher concentration of subprime borrowers in a market that hasn't been effectively tested through , and you have a kind of a toxic brew of concerns," said Michael Taiano, an analyst with Fitch Ratings, who co-wrote a report in July highlighting some of the concerns with the industry.
Jasmine Francis, 29, a technology analyst based in Charlotte, North Carolina, said she first used a buy now, pay later service in 2018 to buy clothes from fast-fashion brand Forever21. Credit reporting company TransUnion found that buy now, pay later borrowers are using the product just as much as credit cards, piling on debt on top of additional debt. A poll by Morning Consult released this week found 15% of buy now, pay later customers are using the service for routine purchases, such as groceries and gas, a type of behavior that sounds alarm bells among financial advisors.
"Ads encourage consumers to use these plans for multiple purchases, at multiple online stores - racking up debt they cannot afford to repay," Brown said. "We have seen some stress , and those are starting to have a hard time," said Max Levchin, founder and CEO of Affirm, one of the largest buy now, pay later companies.
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As 'buy now, pay later' plans grow, so do delinquenciesA 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
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As 'buy now, pay later' plans grow, so do delinquenciesA 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.
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As 'buy now, pay later' plans grow, so do delinquenciesBuy now, pay later loans allow users to pay for items such new sneakers, electronics, or luxury goods in installments. Companies such as Affirm, Afterpay, Klarna and PayPal have built popular financial products around these short-term loans, particularly for younger borrowers, who are fearful of never-ending credit card debt. “You have an industry with a higher concentration of subprime borrowers in a market that hasn’t been effectively tested through (this type of economy), and you have a kind of a toxic brew of concerns,” said Michael Taiano, an analyst with Fitch Ratings, who co-wrote a report in July highlighting some of the concerns with the industry.
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As 'buy now, pay later' plans grow, so do delinquenciesAmericans have grown fond of 'buy now, pay later' services. Here's what you should know about the rapidly growing industry.
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As 'buy now, pay later' plans grow, so do delinquenciesAmericans have grown fond of 'buy now, pay later' services. Here's what you should know about the rapidly growing industry.
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