Buy Now, Pay Later (BNPL) options have become increasingly popular to spread out payments on a major purchase, splitting payments into equal instalments over time, typically just a few months. These loans are often interest-free as long you make your payments on time and in full.
The advantages of BNPL are that they make an expensive item more attainable since you don’t have to pony up a lump-sum. They are easier to get than credit cards, and can help someone buy what they need at a payment plan that fits their budget.
However, before committing to a BNPL loan it’s important to know the terms of the deal. For example, zero-percent interest may not last the length of the loan, leaving you with expensive finance charges down the line and there could be sky-high penalties if you skip or miss a payment.
Some come with fixed fees to your monthly payments, which can cost you extra over the life of the loan vs. just buying the item outright. They don’t help build credit if you pay on time, but late payments may be reported and have a negative impact. They might also encourage consumers to overspend by making products seem more affordable.
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