Lessons to be learned from “Buy Now Pay Later” debt

By Mr Bankruptcy

21st September 2021

Buy Now Pay Later (BNPL) schemes have come under scrutiny recently due to the huge increase in demand for these services but are there lessons to be learnt about a borrowing option that seems too good not to take?

What is BNPL?

BNPL offers a convenient way to pay for low-cost items. At the checkout stage of many online retailers, BNPL is offered as a choice of payment method, which can be very enticing when there’s no interest charge for the duration of the short repayment term. Subsequently, it has seen a surge in popularity, with Which? reporting a third of UK adults having used a BNPL scheme and for millennials, this rises to 67% having using this payment method at least once. In fact, the industry more than trebled in 2020.

The popularity of BNPL schemes and the lack of current regulation around them has led charities to raise concerns about their impact, with one in 10 shoppers reporting being pursued by debt collectors. Last year alone, shoppers were charged £39 million in late fees.

Four lessons from BNPL debts:

The BBC, reporting on findings from Citizen’s Advice, suggests that almost two in five people who have used BNPL in the last year didn’t think it was “proper borrowing”, and six million didn’t fully understand what they were signing up for. These findings highlight the universal lessons that apply to any kind of borrowing and subsequent debt:

• Debts add up. Small debts here and there can be the most difficult to manage. Different terms for creditors and balancing debt priorities make it hard to see the immediate dangers and to manage your way back out of debt.
• Debt isn’t just a financial burden. Many people struggling with the repayment of BNPL schemes are also suffering from anxiety or depression from being chased for their debts. No matter how debt occurs it places a strain both on individuals and on their relationships.
• Always be aware of the arrangements you sign up to. Late fees and interest rates add up quickly, the repayment amount building rapidly to become a slippery slope into unmanageable debt.
• Enticing credit arrangements. These encourage people to spend money that they would not have otherwise so before spending know how you will repay any credit.

Before using any credit arrangement, consider these general lessons to help you decide whether a BNPL scheme is for you or whether it could lead to problems down the line.

James Rosa Associates

James Rosa associates is a firm of debt advisors and debt adjustors. With a supportive and friendly approach, we offer a full range of advice and professional services to individuals and business owners/directors who face unmanageable debt or who are involved in civil or commercial disputes. Our services include:

• Insolvency support
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We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.

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If you want to deal with an unmanageable debt, or bring a dispute to a swift and cost-effective resolution, contact James Rosa Associates, ring 0845 6807217 or email enquiries@jamesrosa.co.uk to find out whether you qualify for a free consultation.

Please be advised that all views expressed in these posts are those of the author and not of James Rosa Associates ltd.