Purchase now, pay later providers have been on the rise as extra shoppers look to short-term installment financing choices to assist them handle the rising prices of each day requirements, not simply pay for discretionary purchases.
BNPL suppliers originated practically $157 billion in shopper credit score merchandise in 2025, up from practically $116 billion in 2024, in accordance with Federal Reserve estimates.
In the meantime, a brand new LendingTree survey reveals that 44% of People anticipate to use for a BNPL mortgage within the subsequent six months, together with 13% who anticipate to take out three or extra in that timeframe. The positioning polled 2,000 shoppers earlier in July.
But falling behind on funds might end in a vicious cycle of debt, specialists say.
“Typically they only, they’ve exhausted their bank cards, and purchase now, pay later is their solely possibility,” stated Jim Triggs, CEO of Cash Administration Worldwide, a non-profit credit score counseling agency.
Bank card debt within the U.S. hit $1.25 trillion within the first quarter, up 5.9% from a 12 months earlier, in accordance with the Federal Reserve Financial institution of New York.
Shoppers utilizing purchase now, pay later for requirements
Ashley Reed and her mother Regina Perez.
Courtesy: Ashley Reed
Ashley Reed tells CNBC she turned a frequent BNPL person two years in the past, after tapping out her bank cards to assist pay caregiving bills after her mom suffered a ruptured mind aneurysm whereas they had been vacationing collectively.
“I wound up maxing out my bank cards to get resort rooms and issues like that to stick with her and to get her transferred again to Baltimore. It was about $2,500 for an ambulance experience, and so, fully maxed out my playing cards,” stated Reed, now 40, who has a full-time job as a paraeducator and in addition works part-time as a radiology assistant.
Having reached her credit score restrict on her playing cards, Reed stated, she turned to BNPL providers to assist make ends meet, together with for groceries.
She’s one in all a rising variety of shoppers doing so amid inflation and different value pressures, equivalent to increased gasoline costs stemming from the U.S. warfare with Iran.
Practically a 3rd, 29%, of purchase now, pay later customers stated they’ve used these short-term loans to purchase groceries — up from 14% in 2024, in accordance with a separate March survey from LendingTree of greater than 2,000 adults. About 18% stated they used a BNPL mortgage for automobile repairs or upkeep, and 13% used it to pay their lease.
Extra just lately, a survey by the shopper advocacy group Shield Debtors discovered that 42% of respondents who’ve used BNPL loans did so to pay for medical or dental care, and 39% to pay utility payments. Knowledge for Progress, a progressive suppose tank, polled 1,164 U.S. voters on-line on behalf of Shield Debtors in early July. The survey attracts on a subset of 438 people who’ve used BNPL loans.
Lacking BNPL funds may be pricey
Maintaining with BNPL funds may be difficult: Virtually half of customers, 47%, stated they’ve paid late on a BNPL mortgage previously 12 months, up from 34% in 2024, in accordance with Lending Tree’s March ballot.
“We have additionally seen that plenty of shoppers are lacking funds,” Triggs stated. “It is undoubtedly a giant situation, a giant drawback.”
The vast majority of BNPL loans have a so-called “pay in 4” plan with no curiosity. Funds are sometimes made in 4 installments — a 25% down cost on the time of buy, adopted by three extra equal funds over the following six weeks.
Nevertheless, some BNPL providers, like those Reed makes use of, provide a biweekly cost plan wherein you pay in 5 installments over six to eight weeks, usually with curiosity.
In 2026, interest-bearing installment loans accounted for over 37% of annual BNPL mortgage issuance, which is almost double the share in 2021, in accordance with a brand new report from Shield Debtors. Late cost charges on some BNPL providers can run $7 to $8 per cost, and curiosity plus financing charges can attain as much as 36%, the report discovered.
“That may make a small mortgage flip into one thing that appears extra like a payday mortgage,” stated Shield Debtors government director Mike Pierce. “It is the equal of an rate of interest of 100% APR or extra as a result of you will have these late charges that stack on prime of one another.”
Business teams say BNPL helps shoppers confront an affordability disaster and rising inflation.
“Shoppers are more and more selecting the pliability that pay-over-time choices with clear, clear phrases present,” American Fintech Council CEO Phil Goldfeder wrote in an announcement.
Miranda Margowsky, a spokesperson for the Monetary Expertise Affiliation, wrote in an electronic mail that “splitting the price of a purchase order into 4 installments with zero to low curiosity is sensible cash administration, not monetary danger.”
Reed stated she has not missed a BNPL cost as a result of she is aware of the dangers. However she nonetheless feels caught.
“It is virtually like I am in a endless cycle of doom,” she stated. “I can not get caught up, after which after I do pay it, one thing else comes up.”
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