If you’ve been using buy now, pay later options for plane or concert tickets, electronics, clothing, appliances, and other items you purchase online, you may have thought you were doing a good thing by splitting up your purchase into manageable payments. For many people, it works out just fine if they use it occasionally.
However, if you’re starting to feel a bit overwhelmed juggling several buy now, pay later plans you’ve agreed to, you might be wondering if there’s any way to make things easier on yourself.
Take a closer look at financial solutions if you’re feeling overwhelmed by buy now, pay later (BNPL) and why you might want to consider alternatives if you’re tempted in the future.
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What Is Buy Now, Pay Later?
Buy now, pay later companies allow you to pay for your purchases in installments over time. In many cases, BNPL apps don’t charge interest if you make your repayments in full and on time. However, the company will charge you interest or late fees if your payments are late.
Let’s say you’re buying a television online for $300. Once you begin the checkout process, you see the option to BNPL. You have the money to pay for the TV, but once you do, you’ll be short on cash, so you decide to pursue the opportunity. A third-party company then approves you to pay for the TV in four equal installments over six weeks. After you pay $75 upfront, the TV gets shipped to you.
You continue to pay $75 every few weeks until you repay the TV in full. If you fail to repay the $300 before the interest-free period ends, the BNPL company will charge you 25% of your remaining balance.
BNPL Companies
Currently, there are several BNPL companies on the market that you may have used or thought of using, including the following:
Klarna
Klarna’s “Pay in 4” plan lets you split your purchases into four interest-free installments. There’s also a “Pay in 30” option, where you can spread your purchases over six to 24 months, but you’ll have to pay interest. If you miss a payment,
Klarna might charge you a late and potentially a returned payment fee. Also, if you default on your payments altogether, the company will charge the entire amount to your card right away and close your account.
Affirm
Affirm partners with popular retailers to offer a repayment offer with an interest rate that ranges from 0% to 36%, depending on your credit and the payment plan you select.
You can repay your purchases over a few weeks or a few months. While there are no late fees, Affirm may charge interest if you extend your payment plan. Interest will accrue immediately if your plan has an APY higher than 0%.
Afterpay
With Afterpay, you can take advantage of a short-term installment plan with a limit that’s usually $600 but can increase if you prove to be a responsible borrower.
The company will clearly outline your payment agreement, which will likely include an upfront deposit plus installment payments due every two weeks.
Afterpay doesn’t charge interest, but there are late fees, and if you default, they may charge the total amount to your credit card.
Which Lenders Have the Best Personal Loans?
If you’re looking to consolidate credit card or buy now, pay later debt, finding the lender with the best personal loan to meet your needs is as simple as using our search tool. Compare personal loans and find the best rates offered right now.
Why Are People Using BNPL? What Are They Using It For?
BNPL solutions appeal to many customers because they make paying for large purchases online and in person easier.
While every company is different, most allow you to divide your purchase into smaller installments, so you don’t have to come up with all the cash at once. You can usually pay off your purchases every two to four weeks.
If you repay your purchases according to your payment plan, you may be able to avoid interest charges.
Also, you can get approved for a BPNL app even if you don’t have the best credit score or no credit at all. This is a huge plus if you’ve struggled to secure financing elsewhere due to your credit situation.
Why BNPL Can Be a Problem
If you’re struggling to keep up with your BNPL plan, you may be finding yourself dealing with some or all of these issues.
Temptation to Overspend
Since BNPL apps focus on repayments rather than the total cost of a purchase, it can be easy to spend more than you can afford, especially if you make multiple purchases with them.
If you’re not cautious, they may steer you into a cycle of debt.
Limited Credit Building
Unlike traditional loans or credit cards, BNPL plans typically do not help build or improve your credit score.
Financial Strain
If you had enough money to buy an item but ended up going with the buy now, pay later plan and using your money for something else, you’ve now got to come up with the money to pay for the BNPL plan.
Accumulating fees and interest can worsen your financial situation and make it more difficult to manage other financial obligations.
What Happens When You Miss a BNPL Payment
Steps to Take If You Can’t Pay Back Your Buy Now, Pay Later Loans
Finding yourself unable to repay your BNPL loans can be stressful, but taking proactive steps can help you manage the situation effectively. Here are some essential actions to consider.
Step 1: Contact the BNPL Provider
- Communicate Early: Reach out to the BNPL provider when you realize you might miss a payment. They might offer extensions, payment plans, or other assistance.
Step 2: Review Your Budget
- Prioritize Expenses: Assess your budget to identify essential expenses and potential areas to cut back to free up funds for BNPL payments.
Step 3: Explore Debt Consolidation
- Combine Debts: To manage repayments effectively, consider consolidating multiple debts into a single loan with a lower interest rate.
Step 4: Seek Financial Counseling
- Professional Advice: Contact a credit counselor or financial advisor for personalized advice and strategies to manage your debt.
Step 5: Use Emergency Funds
- Savings: If you have emergency savings, use them to cover the BNPL payments to avoid late fees and interest.
Step 6: Negotiate a Settlement
- Payment Arrangements: In some cases, you can negotiate a reduced settlement amount with the BNPL provider, especially if you can make a lump sum payment.
Step 7: Avoid Further Debt
- Limit Spending: Cease using BNPL and other credit options until your current debts are under control to prevent the situation from being exacerbated.
Financial Solutions to Avoid Feeling Overwhelmed with Multiple BNPL Plans
The good news is that BNPL isn’t the only way to pay for things you need. Here are several other options you can explore and ways to consolidate your BNPL plans if you’re feeling overwhelmed by too many of them.
Debt Consolidation
With debt consolidation, you combine several debts into a single loan or transfer them to a 0% APR credit card.
This strategy lets you focus on one manageable repayment and streamline the payoff process.
Debt consolidation is a particularly good option if you have a lot of high-interest debt and hope to improve your financial situation and open the doors to attractive financing solutions in the future.
Personal Loans
Personal loans are unsecured loans offered by banks, credit unions, and online lenders. They allow you to spread out your expenses over a period of one to seven years.
They’re worth exploring if you have good to excellent or even fair credit and can land a competitive interest rate.
Unlike BNPLs, personal loans can help you build your credit through timely repayments. You can usually apply the proceeds from a personal loan towards any expense.
0% APR Credit Cards
Credit cards with 0% APR offers for 12 to 21 months may make sense if you have solid credit and can qualify. They can allow you to repay large purchases without worrying about interest.
However, if you can’t pay off a card before the intro period ends, you may face a high APR that can cost you hundreds and thousands of extra dollars in many cases.
Home Equity Loans
If you own a home with equity, a home equity loan, or a home equity line of credit (HELOC), especially if you want to lock in a lower interest rate and don’t have the best credit.
Make sure you repay these loans on time if you choose them, as the lender may foreclose your home if you default.
Secured Credit Cards
Secured credit cards can be a great alternative to traditional credit cards if you have poor credit or no credit.
You can make purchases once you put down a cash deposit, usually equal to your credit limit. Some secured cards even offer rewards like cash back or travel points. Plus, you can improve your credit through timely repayments.
The Bottom Line
- BNPL allows installment payments but can involve hidden fees and interest.
- Popular BNPL companies include Klarna, Affirm, and Afterpay, each with specific terms and potential drawbacks.
- Users are attracted to BNPL for ease of payment and accessibility, even with poor credit.
- Risks include late fees, interest charges, potential credit damage, and the temptation to overspend.
- Alternatives like debt consolidation, personal loans, 0% APR credit cards, home equity loans, and secured credit cards may offer more stable financial solutions.
