The lure of Buy Now Pay Later (BNPL) is often too much for consumers that are in need of a new product but don’t have the funds to be able to purchase it outright. Many BNPL companies are offering new ways to access items including paying in 30 days, splitting payments into smaller chunks or offering longer-term BNPL that takes away any worry about whether it can be afforded in the here and now.
Rather than accepting BNPL as a useful consumer tool, we think it’s time to consider the real dangers that come along with it.
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What is BNPL and How Does it Work?
BNPL is simply a credit agreement that you have with a seller or third party giving you the opportunity to get something you need without paying for it immediately. You are usually offered the BNPL option at the checkout, where it is available or through a third-party company that pays for your item and leaves you indebted to them. You will agree to a repayment date before checking out and are offered interest-free lending as long as it is paid off by the date agreed.
The Main Problems with BNPL
If you are considering taking out a BNPL agreement, it is worth considering whether it is wise to do so, especially when there are many better credit options to choose from. Some of the main issues with picking BNPL include:
- Lack of Credit Clarity – the major issue with BNPL is that the majority of consumers are unaware that they are taking out credit. This means that late payments will often incur hefty interest rates.
- Impact on Consumer Credit Scores – BNPL can be a positive on your credit report if every payment is made on time. However, if you are unable to make the payments agreed upon or your circumstances change and you choose an interest-repayment plan instead, this will reflect negatively on your credit report.
- Makes Budgeting Difficult – many of us prefer to live within our means; BNPL is easy to forget about when you aren’t making payments right away. Plus, taking on more than one BNPL can create havoc with your finances when the payment dates come around.
- Grey Area for Regulation – unlike other loan products such as logbook loans, BNPL agreements do not fall under the Financial Conduct Authority (FCA), leaving you at risk of the terms being changed or the interest being increased without a regulatory body oversight.
Why Other Methods of Credit Are Safer for Consumers
Taking out credit shouldn’t be something that consumers are frightened of, but it is important to be properly informed before you make the decision to proceed. Some of the best credit options when you need to purchase something immediately include logbook loans, bank credit and other money lending options. Borrowing from a lender that is regulated by the FCA, gives you the protection you need against rogue lenders and spiralling debt.
Arrange Your Logbook Loan Today
If you need access to funds but want the safety of a regulated loan provider, then Logbook Loans 247 is here for you. We provide a clear overview of our lending procedures and will work with you to find the best solution to your financial needs so that you are not left with a loan you can’t afford to pay back. Take a look at how we work and then give us a shout if you feel we can help.
Warning: Late repayment can cause you serious money problems. For help go to moneyhelper.org.uk.