Buy now, pay later users are unaware of payment option's consequences, Barclays study claims

Buy Now, Pay Later programs are rising in popularity, but regulators are growing concerned. (iStock)

Buy Now Pay Later (BNPL), which allows consumers to take home an item and divide the payment for it into smaller and more financially manageable installments, is rising in popularity. But a December 2021 study from Barclays claims that many of those who utilize it do not fully understand its potential consequences.

According to the study, 36% of adults who have used BNPL didn't fully understand the consequences of not making payments on time, the United Kingdom-based survey showed. Another 39% of users admitted that they didn't fully understand how the payment product actually works. 

"This research shows that more must be done to educate consumers using unregulated ‘buy now pay later’ products," said Barclays Partner Finance CEO Antony Stephen. "Too many people are taking out these loans without realizing the impact it could have on their finances and with festive shopping in full swing, it’s important shoppers don’t run risk of signing up to agreements, which they may struggle to repay affordably in future."

A personal loan could help you pay off debt that you've accumulated through buy now, pay later services. Credible can show you several personal loan lenders that offer quick loans. Head to Credible to compare rates and lenders, and find a timeline that works for you.


Consumers who use BNPL may not be able to afford it

Many BNPL providers do not perform thorough checks to see if a consumer can afford to make their payments, and 52% of consumers are unaware of this, according to Barclays’ survey. The survey indicated that 36% of consumers said they used BNPL to purchase more than they can really afford.

In addition, 25% of respondents said they struggle to keep track of spending after taking out loans through multiple BNPL providers, and another 24% said this has even caused them to miss a payment. 

As overall cost of everyday living increases, consumers could continue to use BNPL programs, as 35% of consumers in the study said they're more likely to utilize it.

If you're interested in taking out a personal loan to help you pay off BNPL debt, Credible can show you several personal loan lenders that offer quick loans. Head to Credible to compare rates and lenders and find a timeline that works for you.


CFPB stepping in to investigate BNPL risks

Although Barclays' survey was conducted in the U.K., similar findings are being assessed in the United States, and regulators are turning their eye to BNPL companies.

In December, the Consumer Financial Protection Bureau (CFPB) opened an investigation to examine the risks of BNPL programs, sending out orders companies including Affirm, Afterpay, Klarna, Paypal and Zip to collect information on risks and benefits.

The bureau said it's concerned with growing debt, the product’s regulation and data harvesting. The CFPB plans to report its findings to the public after weighing the risks. 

"To protect consumers against taking on more debt than they can comfortably afford to repay, and to ensure minimum standards exist across the sector, we believe regulation should ensure all BNPL providers are required to undertake appropriate affordability assessments, consistent with those in place for other regulated consumer credit products," Stephen said.

A personal loan can be a useful alternative to BNPL if you need cash for large purchases. When it comes to shopping for personal loans, Credible can do the heavy lifting for you. With the click of a button, you can view multiple lenders, rates and terms in one spot.

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