Rick Walz writes the "Consumer Advocate"

Rick Walz writes the “Consumer Advocate”

Buy Now, Pay Later loans are becoming a popular way to buy large items with bite-sized payments. BNPL is a type of loan that allows consumers to take their item home immediately while paying for it in bi-weekly installments. The pandemic created an eCommerce boom, giving even more of a platform for the use of BNPL loans. While these loans allow for easy access to the items consumers want or need; it can be really easy to rack up a tab using these sites.

There are more than two dozen companies offering BNPL loans, including Affirm, Klarna, Afterpay and PayPal. Terms and features differ among the providers, with some offering longer term loans that charge interest.

Consumers usually encounter the BNPL option when shopping online or through a mobile app, although some brick-and-mortar stores are beginning to offer it as well. Most BNPL loans don’t carry any interest and the application process is quicker and less cumbersome than applying for other forms of credit. The lender may not even pull a credit report.

While this may seem great for the consumer, there are some negatives to be aware of when considering a BNPL loan. Some protections that apply to credit cards may not apply to BNPL loans. For example, consumers may not have the ability to dispute a charge if something goes wrong.

Use BBB’s tips to shop smart:

• Consider it a loan. Even though many installment payment services come with only a few small payments and 0 percent interest, it’s critical to remember you are still borrowing money to enjoy a product before it is paid in full. Ask yourself if paying the total price means spending more than you can actually afford, and make your decision accordingly.

• Stick to a budget. Think about how bi-weekly or monthly payments could affect your budget – even if the payments seem small. Will they cut into the funds set aside for necessary expenses, such as rent or groceries?

• Read the fine print. Before signing up to pay in installments, understand exactly how the service works. Read the fine print of the agreement to find out what company is financing, how long the financing terms are to pay off the purchase and in how many installments, how they handle late payments, and how much interest is charged, if any.

• Get to know the financing company. Look up the financing company on BBB.org to make sure they are a reputable company with honest business practices.

• Know how your credit could be affected. Keep in mind that unpaid debts can be sent to collections agencies and after a delinquent period of 90 days can be reported to credit bureaus. This could have a negative impact on your credit score.

For more tips from BBB, visit BBB.org. And if you spot a scam, whether you have lost money or not, report it to BBB’s Scam Tracker at BBB.org/ScamTracker and the FTC at ReportFraud.ftc.gov. Your story can help other consumers avoid similar scams.

Rick Walz is the President and CEO of the Better Business Bureau serving Northern Indiana, which serves 23 counties. Contact the BBB at 800-552-4631 or visit www.bbb.org.

This article originally appeared on South Bend Tribune: Consumer Advocate: Shopping tips for ‘Buy Now, Pay Later’ loans


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