The Rise of Buy Now Pay Later Schemes


OVER the past few years, the prevalence of Buy Now Pay Later (BNPL) options offered to customers has increased among e-commerce retailers. It’s seen as a more convenient way to pay for large purchases and has been rising to fill the gap that the decline in the popularity of credit cards has been leaving.

Allowing people to pay in instalments enables these retailers to increase their website activity and the number of online purchases, but this feature can be damaging to the spending habits of many shoppers.

How Buy Now Pay Later Works

Instead of directly paying a retailer with your own money, the BNPL service pays on your behalf, and you repay them. Its appeal lies in helping people spread out the costs of their purchase over several months – although this can also be achieved with a bad credit loan or any other alternative form of borrowing.

When making an online purchase, a BNPL service like Klarna or PayPal is offered as a payment method at the checkout stage. There are usually various repayment options, with different interest-free periods you can choose from to spread your repayments across.

What Happens if You Get Declined for a Buy Now Pay Later Option?

If you’re declined for a Buy Now Pay Later option, it may be because you have bad credit. Bad credit means you have a history of making late payments or skipping payments altogether. This can make it difficult to get approved for new lines of credit, including Buy Now Pay Later options.

If you’re declined for a Buy Now Pay Later option, you may want to look into getting a bad credit loan or an alternative to bad credit loan.

Bad credit loans are designed for people with poor credit history. They typically have higher interest rates than traditional loans, but they can still be a good option if you need access to funds.

Risks of Buy Now Pay Later

While BNPL is a convenient way to pay, it does come with its fair share of risks.

If you miss a repayment, your credit score can take a hit; missed or late payments can be recorded on your credit report for as long as six years.

After you’ve missed a payment, you can expect to be subject to a minimum monthly repayment that includes fees and interest. Often, the interest will be backdated to cover the time since the purchase. APR rates can be high – between 20-40%.

The debate on whether BNPL services are more useful or harmful is ongoing and there’s no simple answer. It has been suggested that these services have an unnerving propensity to lead even typically frugal spenders into debt.

Advice for shoppers using Buy Now Pay Later

If you regularly use BNPL when shopping, there are some tips to bear in mind if you’re seeing those repayment deadlines racking up:

  • Ask yourself whether you could afford the purchase if BNPL was not an option. If the answer is no, there’s a chance you won’t be able to meet the repayment deadline.
  • Consider drawing up a budget to ensure you don’t spend the amount you owe on something else.

Opinions are still divided over BNPL, but there’s no denying that it’s growing in popularity and is here to stay. If you use it, remember that it’s possible to harness BNPL to best serve you and not just the retailers offering it as a method of payment.

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