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What Can Go Wrong With Buy Now Pay Later?


Remote learning, homemade banana bread, and Paycheck Protection Program loans have gone the way of the socially distanced social gathering, but buy now pay later (BNPL) is one pandemic-era habit that seems to be here to stay.  You can set up installment plans for online purchases using BNPL services such as Affirm, Afterpay, or Klarna without downloading their apps or subscribing to them.  Online vendors of clothing, electronics, and even groceries simply offer the BNPL option at checkout, giving you the option to pay a lot less than the full price of the item at the time of purchase.  When you must pay the rest depends on which options the vendor and BNPL service are offering you.  For example, Klarna has an option to pay in four equal biweekly installments, a pay nothing now but pay the balance within 30 days option, and an installment plan with interest.  BNPL is an obvious choice for many consumers when they can’t afford the full amount now and can’t qualify for a credit card.  It does not, however, make your precarious financial situation any less precarious.  If BNPL debt is contributing to your financial distress, contact a Boca Raton debt lawyer.

Incurring Late Fees Is Easier Than It Looks

Klarna’s four-installment plan is interest-free, and so is the pay in 30 days option.  Late fees can apply more easily than you might expect.  Since the payments are automatic, your card could decline just because Klarna collected the payment hours before your employer deposited your paycheck into your bank account or because your card expired and Klarna tried to collect a payment the day before your new card arrived in the mail.  The late fees are steep enough that you could easily pay as much as if you had used an interest-bearing credit card.

At Worst, It’s a Subprime Credit Card

The Klarna installment plans can range from six to 24 months, and you do not need to pass a credit check to participate.  That is the good news.  The bad news is that their interest rates are at least as high as those of credit cards with a minimum credit score requirement.

It Makes Expensive Items Look More Affordable Than They Are

According to George Kamel of the Ramsey Solutions blog, vendors love BNPL because it increases their revenues.  When a vendor offers a four-installment interest-free plan at checkout, customers feel like they are getting a 75 percent discount.  The real problems begin when you make a new purchase on the four-installment plan before you have paid off your previous purchase.  It is easier than it looks to lose track of how much you are spending when you pay with BNPL plans.

Work With a Debt Lawyer About Being Honest With Yourself About Your Debt

Using BNPL is not a sign of weakness, but rather a sign of financial hardship.  A South Florida debt lawyer can help you face the facts about your debt problems and find the most feasible ways to get out of debt.  Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.



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