Buy Now, Pay Later Loans Pose Holiday Temptation and Risks
-
Consumers are expected to increasingly use "buy now, pay later" (BNPL) payment plans this holiday season, allowing them to make purchases and pay in installments over time. This will likely benefit retailers.
-
BNPL loans are appealing since they often have no interest and allow consumers, especially younger ones, more financial flexibility. But they also pose risks if consumers take on too much debt.
-
One in five Americans plans to use BNPL for holiday gifts. Research shows shoppers spend 20% more when BNPL is an option.
-
BNPL loans typically don't affect credit scores, so consumers can unknowingly take on debt with multiple lenders, worrying experts.
-
Lenders face challenges assessing consumers' credit-worthiness since BNPL loans aren't reported to credit bureaus or shared between companies. This can let borrowers amass too much debt.