With privacy concerns and scams, Buy Now, Pay Later (BNPL) was big news last year at the Consumer Financial Protection Bureau (CFPB). In a recent report by the CFPB, the agency determined those who are in the worst position to take on more debt are the most likely to use BNPL services.
Howard Dvorkin, CPA and chairman of Debt.com, wants consumers to know that BNPL providers are all different. “They offer very different terms, and you need to closely review the agreement,” Dvorkin said, noting that BNPL arrangements can have different terms for payback, interest rates, and fees. Interest rates can increase if you’re late on a payment, jumping as high as 36%, nearly double the average.
Missed payments on a BNPL loan will also hurt your credit score, same as a credit card. But if you make timely payments on a credit card, your credit score will increase. This isn’t true for BNPL loans though. Timely payments do not help your credit score.
The CFPB is concerned that Buy Now, Pay Later providers will cause consumers to overspend. Short-term installment loans may seem like a quick and easy solution but can quickly pile up if you’re not careful.
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