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Buy Now Pay Later:

Most of us have heard of Buy Now Pay Later (BNPL) schemes, which allow you to spread the cost of a purchase over several instalments. These are becoming increasingly popular and easier to access than ever. 

Some common providers of BNPL schemes that you might have heard of are:

• Klarna
• Laybuy
• ClearPay 
• Openpay
• Zilch
• Flava
• PayPal 

You might be tempted to use BNPL, but it’s important that you think about it before you do. Some providers don’t give you much information up front, so it can be difficult to know whether it is a good idea or not. 

It is important to remember that BNPL is just another way to borrow money, many people don’t think of it like this because it is presented as another way to pay at the checkout. However, if you don’t keep up your payments, you can be charged significant fees which means it can quickly get very expensive. Have a look at our example below: 

You want to buy some clothes online, but you can’t find everything you want at the same place. You make four separate purchases at four different retailers. The total cost is £75 and you choose to spread the cost over 3 months. 

However, because you made 4 different purchases, this means that you have four different agreements. Instead of one payment of £25 coming out every month, you will actually make 4 payments of £6.25 every month. This is fine, as long as you can make these payments. 

In the second month, there is a problem with your bank account, and you don’t have enough to make the scheduled payments so your bank rejects them. As the payments failed, you are charged a late fee. But because you have 4 separate agreements, you’re charged 4 separate late fees of £6 each. 

This means that you’ve been charged an extra £24, which is nearly 33% of what you spent in the first place! If you’re late the following month, there will be another £24 charge. So instead of paying £75 for your clothes, you actually pay £123! 

Now, imagine that as well as those clothes, you’d also bought some new video games and some gifts for a birthday. You can see how these fees very quickly add up and can become unmanageable. You might wish you hadn’t used BNPL at all, and you wouldn’t be alone. Citizen’s Advice research suggests that 1 in 4 people that used BNPL regretted it. This is because they either spent more than they could afford, or paid more than they expected. 

Buy Now Pay Later isn’t currently regulated. This means that the lender doesn’t have to check whether you can afford to make the repayments, which means that you could be borrowing more than you can afford. 

You might have heard that BNPL doesn’t appear on your credit file and this is true for some lenders. But it can still affect your credit score. Some people who use BNPL end up not paying other debts, or falling behind on bills, which will be recorded on your credit file. In severe cases, people have struggled to pay for essentials such as food or rent. This is often because the payments come out automatically, and people forget how much is due, and when it is coming out. 

Buy Now Pay Later works for some people, and it can be a good way of making large purchases more affordable. But it can also trap people in spiralling costs. If you buy now, you should always make sure you can definitely afford to pay later! 

If You’re Struggling: 

If you need help with your finances, you can talk to us! Give us a ring on 01642 633877 or e-mail us at debtadmin@stockton-cab.co.uk – one of our caseworkers will get in touch and help you to work out the best solution for you. 

For more information on Buy Now Pay Later you can visit the Money Helper site at https://www.moneyhelper.org.uk/en/everyday-money/types-of-credit/what-are-buy-now-pay-later-purchases