Buy Now, Pay Later Loans Raise Concerns of Hidden Holiday Debt
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Consumers are expected to rely heavily on "buy now, pay later" (BNPL) payment plans for holiday shopping, which benefits retailers but worries credit experts about excessive debt.
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BNPL plans allow shoppers to make a down payment at checkout and pay the remainder in interest-free installments over weeks or months.
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These short-term loans increase access to credit but can also lead consumers to take on too much debt across multiple lenders since the loans rarely affect credit scores.
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One in five Americans plans to use BNPL for holiday gifts, potentially spending 20% more than they would otherwise.
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Credit risk experts warn that BNPL loans stack up across lenders, hiding consumers' total debt obligations and their true creditworthiness.