Credit Experts Worry Holiday 'Buy Now, Pay Later' Boom Risks Over-Lending and Debt for Consumers
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Consumers are expected to rely heavily on "buy now, pay later" (BNPL) installment plans for holiday shopping, concerning credit experts about potential "loan stacking".
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BNPL loans allow shoppers to make a down payment at checkout and pay the remainder in installments over weeks or months with little to no interest.
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These loans appeal to younger consumers and those with limited credit access, increasing financial inclusion, but features like soft credit checks and non-reporting to credit bureaus raise debt risks.
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BNPL loans encourage 20% higher spending for retailers compared to other payment methods, but "loan stacking" across multiple lenders can saddle consumers with excessive debt.
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Credit risk experts worry BNPL loans mask consumer credit-worthiness and lead to over-lending, though BNPL companies claim built-in signals help them adjust underwriting as needed.