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Buy Now Pay Later: When Later Comes Around

It’s that time of year again, the tree is going up, there’s tinsel on every available surface, and our free time is spent buying presents for our loved ones. During the festive period, many shoppers will be turning to Buy Now Pay Later services to ease the rising costs of Christmas.

With approximately 11.6 million active users of Buy Now Pay Later options, surely, it’s a safe service to use. When carefully used a pay later loan will be useful, however, they can also see customers facing debts and lowered credit scores in the future.

Before you jump credit first into the world of Pay Later shopping this Christmas, read DCBL’s advice on the potential consequences of missed payments with BNPL…

What Is Buy Now Pay Later?

BNPL services have been around for years: they quickly rose in popularity over 2020 with many people increasing their spending over lockdown and others facing reduced income. They are a type of credit product, with customers being able to purchase items then and there but paying the cost later. Most Buy Now Pay Later services are interest-free, so no extra cost is added for using the service when used correctly.

This rise in popularity means a huge number of retailers now utilize BNPL, both online and in-store, including large companies like ASOS, John Lewis, GiffGaff, Samsung, H&M, AO, Pandora, and more. You can purchase clothing, beauty, furniture, electronics, homeware, and food, all through Pay Later loans, either by paying the full amounts at a later date or by splitting the payments into smaller amounts.

Many retailers only conduct a soft credit check before approving these loans but there are some that can leave a hard check so be mindful of this. Buy Now Pay Later providers won’t keep track of your spending or check your ability to pay back the loan in the future so make sure you can afford to make the repayments before committing.

What Happens If You Can’t Pay Later?

Buy Now Pay Later Loans

Unfortunately, with this being so readily accessible yet also easily forgotten about, UK consumers have now racked up approximately £4.1 billion worth of debt from unpaid Buy Now Pay Later services. With debts often rising during the festive period and many now turning to Pay Later options, this figure will more than likely continue to rise.

When you miss a payment, most providers will allow a short period of time where you can still make the payment. However, once you’re outside this time then you may be hit with late payment fees, and it may negatively affect your credit score. Some may even add a lump sum to the amount owed or incrementally increase the penalty fees until they receive the money. If left long enough then some BNPL companies will instruct a Debt Collection Agency to retrieve the debt.

It is best to check the small print and read up on the policies and procedures in these instances before accepting the loan.

If you find yourself in a situation where you can’t make the next payment, contact your creditor as soon as possible as you may be able to find a solution together.

The Future of Buy Now Pay Later

Buy Now Pay Later Debts

According to the Bank of England, households will spend on average over £700 more in December to pay for Christmas, with over a third of UK consumers borrowing money to buy gifts. Debts rise over this period and using Buy Now Pay Later options will see these debts carried over late into the new year.

Concerns around the rising level of pay later debts have led to the government implementing regulation by the Financial Conduct Authority (FCA). This will help protect customers and provide additional protection and fair treatment, however, this won’t take effect until 2022 or 2023.

Buy Now Pay Later services have significant benefits, especially around Christmas, but caution and extra scrutiny are needed to ensure we don’t end up in difficult financial situations in the new year!


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