New York (AP) – Inter Price rise and Reduce employment growthFrom concert tickets to fast food delivery, using “buy now, pay later” has become increasingly appealing. But more use can mean bigger trouble as there are more people Being late in paying off these loans.
Buy now and have been able to pay later loans during the pandemic, especially among young people. These loans can help you make large purchases without paying interest or undergoing a rigorous investigation on your credit report, but they can also be used easily.
Approximately four in ten people under the age of 45 say they used the “Buy Now, Buy Later” service when spending on entertainment, restaurant meals, or paying for essentials such as groceries and medical care. Voting from the Associated Press NORC Civil Service Research Center.
Buy now and later loans were not previously reported to three major credit reporting agencies. But consumers will see it soon Impact of Buy Now, Pay Later Loans on FICO Credit Score.
Whether you are a first-time buyer, you will pay for a later plan whether to buy now or not. Below are expert recommendations for using this tool responsibly:
Focus on needs and requests
Buy now, pay for later plans, and purchase purchases are monthly installments, usually in four payments. These loans are sold as low or uninterested. Klarna, Afterpay, Paypal and Affirm are one of the most popular purchases right now.
These loans should be ideally used for large-scale purchases or essentials, says Lauren Bringle, a certified financial counselor at Self Financial.
Bringle recommends asking yourself these questions before you buy. Can I survive without this purchase now? Necessary for work, school, or basic family needs?
Buy now, pay later is best used when you have a plan for a purchase rather than an impulsive purchase. For example, if you need to buy a computer for your school or a new refrigerator for your home, we recommend Tyler Horn, planning manager for Origin, a budgeting app.
Pause before purchasing
Before deciding to make a purchase now, we recommend that you consider whether it is the best financial decision for you before paying for the later loan.
Buy now. Strategic use can make later plans a positive budgeting tool. But knowing your spending behavior before using it is essential, Rasure said. If you are an emotional spender, it may be difficult for you to ease the use of this tool, and you could end up adding to your financial stress.
“Buy now and pay later can be a coping mechanism rather than a financial tool that can get you quite a bit or improve your cash flow,” says Rasure.
If you need other payments, such as credit card or student loan payments, consider buying now.
Please read the detailed print
Like a credit card, each buys now and later loans have conditions that may vary depending on the purchase and provider. It’s important to know that you agree before signing up. Recommended by Michael Savino, chief lending officer at MunicipalCredit Union.
“Always read the fine print. Understand what happens when you miss a payment or enter the default,” Savino said.
In general, in your case Missing your purchase now and pay lateryou may face charges, interest, or the possibility of being banned from using the Services in the future.
Avoid accumulating BNPL loans
If you are trying to pay back two, three, or multiple loans at the same time, you can easily bump into the cost and schedule of repayments that are difficult to keep up with, Savino said.
“Juggling multiple plans creates blind spots and overall debt loads, making it difficult to manage multiple repayment dates,” Savino says. “So the more loans you have, the more difficult your budget will be.”
Best approach: Beware of your overall spending, limit the number of purchases now, and pay later loans.
Track your loan
Whether you’re paying for multiple purchases now or not, whether you’re buying and buying later, you want to know where your money is going at any time, recommends Credit Karma consumer advocate Courtney Aleph.
“Buy now, paying later often requires automated payments, so you need to make sure you’re funding your account so that these payments are processed correctly,” recommends Jennifer Seitz, education director at Greenlight, a family-friendly financial literacy app.
From setting calendar reminders to creating complex Excel spreadsheets and tracking them in your app, there are many ways to track your loan payments, says Jesse Mecham, founder of budgeting app YNAB.
Finding the best effective method for you will help you stay on track and avoid late fees.
Buy now and work later
For shoppers with low credit scores or no credit history, buying now and paying for a later loan seems like the only, if not the only, loan option. If used moderately and responsibly, these short-term loans could be an aggressive lending campaign, Savino said.
“This allows us to establish baseline (and) access to other affordable credit options that ultimately provide financial health,” he added.
Still, Nerdwallet’s Rathner emphasized that shoppers using these tools always remember that they always buy now and pay later is a form of borrowing.
“It feels like you’re given a little extra time to pay off,” Lassner said. “But the reality is that if you miss a payment, it can hurt your credit just like you’re missing payments on other loans.”
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The Associated Press is supported by the Charles Schwab Foundation for education and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
