Money Wellness
Image of a person holding a phone with a buy now pay later check out screen open
category icondebts
calendar icon21 Jul 2023

Millions don’t realise debt risk of buy now pay later

Buy now pay later (BNPL) has become the second most popular way to borrow in the UK, but around half (47%) of adults don’t know it could get them into debt, according to Creditspring.

A survey by the company revealed misconceptions about BNPL are putting people at risk, with one in seven wrongly believing it's impossible to get into debt using BNPL. This figure is even higher among young people, with over half (51%) of 18-34 year olds totally unaware of the risks.

A third of people (32%) don’t regard BNPL as a form of borrowing. While 47% don’t realise they could eventually be referred to a debt collector if they miss BNPL payments. And 43% are unaware that BNPL providers can add late fees.

One in five 18–34 year olds have used BNPL since January 2021.

This is more than the number of people who have taken out a mortgage, car finance or a loan from a mainstream lender.

The lack of understanding around BNPL means millions of UK borrowers are at risk of hurting their credit reports and potentially falling into debt.


What is buy now pay later?

Buy now pay later offers an interest-free way to spread the cost of a purchase.

It can be a good option providing you’re able to keep up with repayments.

BNPL gives a choice of repayment options, such as paying in several equal amounts - usually monthly but it can also be weekly or fortnightly - or paying the fixed amount in one go on a set date.

BNPL is offered when you come to checkout - usually online but it’s becoming increasingly available in shops too.

It’s typically offered by a separate credit provider, not the retailer you’re buying from, and it’s currently unregulated. This means the Financial Conduct Authority hasn’t given providers a set of rules to follow and you don’t get full consumer protection if something goes wrong.


Who offers BNPL?
There are several different providers offering buy now pay later including:

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

Flava is only available for food and grocery shopping. It works slightly differently – you must make a first payment when you place your order and then pay the rest off in three weekly instalments.

Some retailers also offer their own schemes such as Next, Very and Littlewoods.


BNPL can affect your credit score

It’s important to be aware that like any other form of credit, BNPL can affect your credit score.

Certain BNPL lenders make a hard credit check every time you spread payments over a long period.

These checks appear on your record and lots of hard checks can affect your credit rating.

Failing to make a payment on time will also have a negative impact on your credit score.

Even if your BNPL purchases don’t appear on your credit history, you’ll be asked about whether you have used the product during affordability checks is you apply for other credit. If you have used BNPL a lot, it might affect the likelihood of your applications being accepted.


What happens if you miss a BNPL payment?

If you don’t keep up with repayments, you could be charged a fee or the payment may be rolled into the next instalment, meaning you’ll have to pay double the next month.

If you’re unable to make payments, some BNPL providers will pass your debt onto a collection agency.

This means if you’re struggling to pay, it’s important to contact your BNPL provider and talk to them about your situation. Most will try to work with you to find an affordable solution.

Avatar of Caroline Chell

Caroline Chell

Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.

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