(WJAR) — Buy Now Pay Later loans have exploded in popularity.
In fact, a new survey by LendingTree finds that 25% of Buy Now Pay Later users now using the installment loans for everyday essentials like groceries.
But is that a smart idea?
And what does that say about the state of the economy?
“To see that people are using them to buy something as basic and fundamental as groceries I think is a pretty clear indication that a lot of people are struggling to kind of find new ways to extend their budget and make ends meet a little more easily during these kind of uncertain economic times,” explained Matt Schulz, chief consumer finance analyst for LendingTree.
Schulz said these zero-interest loans can be useful for certain purchases, but taking out too many often leads to problems.
“It’s really easy to get a lot of them in pretty short order, and if you’re not really that experienced at managing credit, it’s easy to get kind of over your head a little bit and end up missing payments and end up accruing late fees,” cautioned Schulz.
This survey also found that two-thirds of Buy Now Pay Later users would consider using these loans for takeout – with companies like DoorDash and Klarna actually teaming up to capitalize on that interest.
But is there really a difference between putting everyday expenses like food on a Buy Now Pay Later installment plan versus a credit card?
Schulz said there’s one big difference.
“It’s usually connected to a debit card or a checking account, so there’s not really the option of, ‘Oh, I’ll pay the minimum or I can pay more,’” explained Schulz. “It’s an installment so you need to pay what that amount is, generally every two weeks, in order to be current.”
He said you also shouldn’t be using Buy Now Pay Later loans to improve your credit score.
Even if you’re paying of those loans on time, Schulz said it currently makes no impact on your credit.
