More than a quarter of consumers can't afford their BNPL payments, survey says

Some respondents report skipping other bills for BNPL payments

More than a quarter of consumers, according to a recent survey, say that they're struggling to afford their Buy Now, Pay Later installments. (iStock)

Amid the increase in Buy Now, Pay Later (BNPL) transactions, a new survey from debt relief company DebtHammer claims that many consumers are unable to afford their payments.

BNPL is a financing method that allows consumers to split their purchases into smaller, more manageable interest-free payments, and well-known BNPL companies include Afterpay, Affirm, Sezzle and Klarna. According to a report by Insider Intelligence, global transaction volume for BNPL service could reach $680 million by 2025.

DebtHammer's survey found that 30% of respondents have struggled to make their BNPL payments, and have therefore had to skip paying a bill for essentials — utilities, rent, mortgage, car, child car — to avoid defaulting.

"The consumer may fail to realize/remember these are loans that need to be paid back — just like credit card purchases," said Dr. Lawrence White, a professor at New York University's Stern School of Business. "If the consumer gets too deep into debt and has difficulty in repaying these loans, he/she may incur late fees/penalties and suffer ‘hits’ to his/her credit score." 

If you're looking for ways to pay off debt accumulated from using BNPL services, you could consider taking out a personal loan. Visit Credible to make sure you’re getting the best rate and lender for your needs without affecting your credit score.


Why are consumers using BNPL?

The most popular reason (42.40%) consumers utilized BNPL services for their transactions, according to DebtHammer's survey, was because of their inability to afford items "without the payment plan." The opportunity to take advantage of interest-free payments was also a popular reason (33.40%).

In the survey, Dr. White stated that BNPL services are changing consumers' spending habits, adding that some plans that don't require credit checks and "are making it possible for consumers with bad credit or with thin credit files to be able to access installment credit."

"The use of the BNPL plan may not help the consumer build his/her credit score if the BNPL offeror is not reporting these (timely) payments to a credit bureau," he said.

More than a quarter of survey respondents (27.84%) said that they used BNPL services because of the urgent need of an item, and that they couldn't wait until they had the full amount of money to pay for it.

If you're looking for an alternative to BNPL services when making a large purchase, consider a personal loan. With a personal loan, you can easily access the funds you need at a lower interest rate. Head to Credible to compare rates and lenders and find a timeline that works for you.


BNPL adding to debt struggles for many Americans: survey

Dr. White noted in the survey that in order for consumers who utilize BNPL services to get back on track with their finances, there are some steps they can take.

"Draw up a budget that takes into account your likely income and likely expenditures and make sure that the former exceeds the latter, so that there is room for repaying these debts," he said.

The survey also said that respondents took advantage of BNPL for purchases ranging from $50 to $5,000, but the highest percentage (16.92%) was for purchases between $101 and $200.

Dr. John Hilston, economics professor at Eastern Florida State College, added that a potential remedy for consumers struggling to repay BNPL installments is to contact the provider directly.

"Explain the problem and ask if the repayment terms can be modified. Maybe the company would consider a longer-term and lower monthly payment? Some companies might be willing to negotiate," Hilston said.

More than half of respondents in DebtHammer's survey said that they're paying off more than one BNPL plan, and 22% actually said they regret their decision of taking advantage of a plan whatsoever. But even consumers say they're struggling to make payments, they continue to use BNPL services at higher rates. The survey also found that nearly half (45%) of respondents have signed up for at least one BNPL plan, an increase compared to 41% in April 2021.

Consumers can consider a debt consolidation loan as a way to repay BNPL-related debt. Visiting Credible can help you compare debt consolidation options to find the best personal loan rates for you, based on your credit score and credit history.

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