A recent survey conducted by Lending Tree reveals a growing trend among American consumers utilizing “buy now, pay later” (BNPL) loans to finance various purchases, including concert tickets and groceries. The survey indicates that 60% of general admission attendees at the Coachella music festival relied on BNPL loans to fund their experience. This positive trend indicates that more people are opting for alternative financing sources. They’re looking for new proven ways to stretch their dollar farther as cost of living increases.
The survey collected data from nearly 2,000 U.S. consumers. It found that close to half of them already used Buy Now, Pay Later (BNPL) services. Matt Schulz, chief consumer finance analytics at Lending Tree, pointed to the reality that many are struggling financially right now. He stressed the pain people are in right now. They are desperate, as economic pressures mount, to find ways to make their budgets go farther.
Though BNPL loans can provide a useful, interest-free way for consumers to finance purchases, they come with substantial risks. The survey turned up one very surprising result. A staggering 41% of respondents admitted to defaulting on a BNPL loan in the last 12 months. In addition, more than one-third (34%) of respondents have missed a payment in the 12 months before taking the survey. Schulz warned consumers of the dangers of mismanaging these loans.
We deeply acknowledge that people need to be vigilant in using these tools. They can be a powerful source of interest free support in financial emergencies, mismanagement can threaten their potential. Schulz, for example, the most dramatic.
When examining the data more closely, a disturbing theme emerged. Under these products, consumers can be hit with significant penalties for failing to pay their BNPL installment loans on time. Over three-quarters of respondents took out more than one loan at the same time, which further compounds their financial stress. In reality, 60% of BNPL users said they took out several loans at once. Nearly one in four of them confessed to managing three or more loans concurrently.
Today, consumers of all ages are turning to Buy Now, Pay Later (BNPL) for their everyday purchases. This trend is most pronounced when it comes to grocery shopping. The survey found that one in four of BNPL borrowers today are using these loans to purchase groceries. That still represents a full $3 billion increase over last fiscal year. In 2023, that number was 21%, with respondents indicating they use it at least weekly. Projections for 2024 suggest this number might even increase to 14%.
The potential effects of this trend on overall consumer debt and financial stability are worrisome. Schulz dared to guess it could get worse in the coming months, as a shaky economy continues to squeeze households hard. “I kind of do think it’s going to get worse, at least in the short term,” he said.
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