Buy now, pay later apps have appeal for cash-strapped college students, but they can be a slippery slope to debt if they’re not used responsibly.
"As it becomes easier for consumers to access buy now, pay later loans, it becomes more important for the consumer to be their own filter and to go through all the right steps that they need to take to ensure that they are borrowing for the right reasons," said Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling.
"If you have the money, if you can afford it, and if it's not going to derail your budget, go ahead and just pay the balance," McClary said."It's certainly less complicated than entering into some kind of a multipart payment plan." And, consider this: An emergency expense — like a new mattress or computer — could pop up that can't wait. What happens if you can't afford it because you're still paying off that handbag? Or, maybe you qualify for a second buy now, pay later loan, but then you have two giant bills hanging over your head for the next year or however long?
Sometimes, only late BNPL payments are reported, which might negatively affect your credit score. This can have a drastic impact on your prospects of applying for a credit card, mortgage rates and other loans. One of the primary financial risks of BNPL is that it may encourage you to spend significantly more than you normally would."With these loans, overspending is kind of the point," Schulz said."It's important for people to understand that just because someone will give you money, it doesn't mean that you should take it or can afford it."
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