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Understanding “Buy Now, Pay Later” Services

Posted September 8, 2023
12:15 pm

By Brandon Delia, 2023 Summer Associate with Legal Aid's Intake – Bankruptcy Project

“Buy Now, Pay Later” (BNPL) services offer low payments spread over an extended amount of time. These services may seem like an affordable choice that will save money, but often they hide high costs by disguising them with low recurring payments. With BNPL services you will almost always pay more.

The Hidden Risks of Buy Now Pay Later
With BNPL services, buyers are placed on a set payment plan to spread out payments. This makes something seem more affordable at the time of purchase, which can lead buyers to take on more debt than they can afford - especially if they try to juggle multiple BNPL repayments.

Such circumstances create a higher risk of missing a payment. You could face severe consequences if you make late payments or “default” on your debt, which could negatively impact your credit score. A poor credit score restricts your financial freedom to build and use credit in the future.

Buy Now, Pay A Lot More Later
BNPL services are financially dangerous. Even if your payments are small, you are still building large amounts of debt. This debt increases with time.

BNPL services DO NOT build credit. These debts can harm credit scores, especially for people who already struggle to get approved by banks. These services aren’t regulated by the same federal rules that banks and credit unions follow. Without these rules, consumers are less protected and may face unexpected fees and high interest rates.

Depending too much on BNPL services can lead to a never-ending cycle of debt. Not repaying BNPL loans can hurt more than just your credit score. Unpaid balances may be sent to collections and could lead to lawsuits for unpaid debt or could result in the denial of housing because of a poor repayment history.

Tips for Smart Borrowing
If you need to use BNPL services or any other loan, remember to review the contract. Before committing, you should (1) calculate the total cost you will pay with interest, (2) know what happens if you miss a payment, and (3) learn about the creditor to see how they treat their consumers. By making informed financial decisions, you can protect yourself and avoid potential problems.

What if I need help getting out of debt?
If you have been sued for an unpaid debt or if you have judgments for money owed, Legal Aid may be able to help. Contact Legal Aid at 888.817.3777 or apply for help online at

This article was published in Legal Aid's newsletter, "The Alert" Volume 39, Issue 2, in September 2023. See full issue at this link: “The Alert”- Volume 39, Issue 2 – Legal Aid Society of Cleveland.

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