“Buy now, pay later” is a convenient online payment option, but many users are increasingly taking the “later” part to heart.
A new LendingTree report shows that a rising number of consumers are paying late on these short-term loans. LendingTree analysts are also revealing that more borrowers are relying on the option to make ends meet.
The “buy now, pay later” feature allows shoppers to split purchases into smaller, often interest-free installments. It may seem simple, but it depends on timely payments.
“What we found is that there’s an awful lot of people who tend to pay at least a little bit late,” said Matt Schulz, LendingTree’s chief consumer finance analyst.
According to the report, more than 41% of people reported making a late payment in the past year, which is up from 34% the year before.
“They’re not paying 30 or 60 or 90 days late, it’s usually a week or so,” Schulz said. “But that is still long enough to incur a late fee.”
The report also highlights a deeper concern about how consumers are using the loans. Analysts found a growing number of borrowers are turning to “buy now, pay later” services for daily essentials, including groceries.
“We found that about one in four people who have used the ‘buy now, pay later’ loan have used it to buy groceries,” Schulz said. “And I think that’s a pretty clear sign that people are struggling and looking for ways to help them make ends meet.”
Schulz adds that the number of people using these services for groceries has increased 14% over the past year.
The report also found that many people now see the option as a bridge to their next paycheck.