Buy Now, Pay Later Loans (also known as BNPL Loans) are on the rise. According to CNBC, Consumers have taken on a massive amount of credit card debt in 2022, rising to $841 billion in the first three months of the year. Low unemployment paired with high inflation is thought to have contributed to this spike in borrowing.
Though it’s human nature to want something now instead of waiting, it’s important to understand how BNPL loans can be risky. Compared to other debt (like a credit card or auto loan), payments made on BNPL loans are not typically reported to credit-scoring companies.
This makes it challenging for lenders to know how many loans a consumer has outstanding, as well as prevents the borrower from earning any credit from making on-time regular payments. Also, late payments are handled differently depending on the company.
“BNPL loans are a potential path to accumulating a lot of debt, very quickly,” said MMCCU President David Murphy. “We encourage our members to contact us for alternative resources. We work with each individual to determine the best option for them.”