In recent years, Buy Now, Pay Later (BNPL) schemes have become increasingly popular among consumers. These schemes allow customers to purchase goods and services and defer payment until a later date, often with no interest or fees. While this may seem like an attractive option for those on a tight budget, consumer watchdog Which? has warned of the potential debt risks associated with BNPL.
According to Which?, BNPL schemes can be a slippery slope for consumers who are already struggling with debt. The ease of access to credit can lead to overspending and a false sense of financial security. In addition, some BNPL providers may not conduct thorough affordability checks, which could result in customers taking on more debt than they can realistically afford to repay.
Furthermore, BNPL schemes can also have a negative impact on credit scores. While some providers may not report missed payments to credit reference agencies, others do. This means that customers who miss payments could find it harder to obtain credit in the future, or may be offered less favourable terms.
Despite these risks, BNPL schemes continue to be popular among consumers. In fact, a recent survey by Which? found that 45% of people who had used BNPL had done so because they couldn’t afford to pay upfront. This highlights the need for more affordable credit options for those on low incomes or with limited access to credit.
So, what can consumers do to protect themselves from the potential debt risks of BNPL? Firstly, it’s important to only use BNPL schemes if you can realistically afford to repay the debt. Secondly, it’s worth shopping around to find the best deal, as interest rates and fees can vary widely between providers. Finally, if you do find yourself struggling with debt, seek advice from a reputable debt charity or financial advisor.
In conclusion, while BNPL schemes may seem like an attractive option for those on a tight budget, they can also be a risky way to borrow money. Consumers should be aware of the potential debt risks associated with BNPL and take steps to protect themselves from financial hardship. By doing so, they can ensure that they remain in control of their finances and avoid falling into a debt trap.