As the name suggests, the meaning of the “buy now, pay later” transaction is simple. This means a point-of-sale installment loan offer. The process leads to spreading the cost of the product(s) over several payments. But is it becoming a debt trap? Yes, UK-based research suggests that might be the case.
In a report by The Guardian, a study was published which indicates that nearly a third of buyers who use BNPL credit struggle to repay. They said loan repayments had become “unmanageable” with the country’s steadily rising cost of living.
According to the research, consumers are spending more through BNPL as shoppers who use this form of credit now repay an average of 4.8 purchases. This is almost double February’s 2.6 buys. The report mentions that the average BNPL user’s outstanding balance currently stands at £254.
According to the report, Barclays Bank and debt charity StepChange said it was “worrying”. They said 30% of Brits used BNPL to buy goods. Of the total, 31%, or nearly a third, say the loan got them into problem debt.
The study also shed light on the merchant side as the BNPL offer, which is a form of loan for them, is expected to account for almost a quarter of their sales by the end of this year.
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Post expires at 10:46pm on Sunday July 3rd, 2022