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The Wall Street Publication > Blog > Economy > Purchase now, pay later pitfalls: Many shoppers aren’t paying loans
Economy

Purchase now, pay later pitfalls: Many shoppers aren’t paying loans

Editorial Board Published May 21, 2025
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Purchase now, pay later pitfalls: Many shoppers aren’t paying loans
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BNY Wealth CIO Sinead Colton Grant seems on the monetary panorama of the economic system on ‘The Claman Countdown.’

Klarna, a major participant within the purchase now, pay later (BNPL) house, has confronted losses in current months as shoppers didn’t make funds on their loans. 

Whereas Klarna’s consumer base continued to develop within the first quarter, its losses greater than doubled in contrast with a 12 months earlier, the corporate mentioned in its Monday earnings report. Its credit score losses, when a borrower defaults on a mortgage, reached 17%.

Shoppers have frequently leaned on firms comparable to Klarna, Affirm and Afterpay to provide them extra monetary flexibility within the face of persisting inflation, excessive rates of interest and scholar mortgage funds, which resumed in October 2023 after a pause as a result of COVID-19 pandemic. 

COSTCO ROLLS OUT BUY NOW, PAY LATER FOR BIG ONLINE PURCHASES THROUGH AFFIRM

Shoppers leverage the platforms as a result of they permit for the choice to pay in 4 interest-free installments each two weeks or, if accredited, could make month-to-month funds over the course of six to 18 months, with curiosity (Afterpay solely permits the four-installment plan). However specialists have lengthy warned although that these providers can simply be a ticket to overspending. 

Shoppers have frequently leaned on firms comparable to Klarna, Affirm, and Afterpay to provide them extra monetary flexibility within the face of persisting inflation, excessive rates of interest and scholar mortgage funds. (Smith Assortment/Gado / Getty Pictures)

With Klarna, customers are in a position to break up their buy into a number of installments as a substitute of paying the complete quantity upfront. Klarna fronts all the cash upfront to the retailer after which takes cash from a consumer-linked fee over an prolonged time frame.  

RISKS OF BUY NOW, PAY LATER: ‘TICKET TO OVERSPENDING,’ EXPERT SAYS

If shoppers haven’t got the cash to pay, they get hit with a late payment. 

One other concern amongst specialists is that getting accredited for these providers can be terribly simple. For example, simply because somebody is accredited to make use of these loans does not assure that they’ve the monetary means to pay them again, in accordance with LendingTree’s chief client finance analyst Matt Schulz.  

afterpay

With purchase now, pay later choices, customers are in a position to break up their buy into a number of installments as a substitute of paying the complete quantity upfront. ( Brent Lewin/Bloomberg  / Getty Pictures)

However these points aren’t distinctive to Klarna. Greater than 40% of customers of BNPL loans say they paid late on considered one of them up to now 12 months, up from 34% only a 12 months in the past, in accordance with a LendingTree survey.

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In line with LendingTree’s BNPL Tracker, 39% of People have been at the least contemplating making use of for a purchase now, pay later mortgage in April, up eight factors from March. This marked the largest month-to-month bounce since an eight-point enhance in March 2023.

Households have not been in nice form as People’ debt ranges, together with bank card debt, rose to new all-time highs within the fourth quarter of 2024, in accordance with a report by the Federal Reserve Financial institution of New York in February. 

Laptop being used by a couple to review finances.

Households have not been in nice form as People’ debt ranges, together with bank card debt, rose to new all-time highs within the fourth quarter of 2024, in accordance with a report by the Federal Reserve Financial institution of New York in February. (iStock)

The report confirmed that total family debt elevated by $93 billion to $18.04 trillion on the finish of 2024, an all-time excessive. Bank card balances rose by $45 billion from the prior quarter to succeed in $1.21 trillion on the finish of December, which can be a file excessive.

FOX Enterprise’ Eric Revell contributed to this report. 

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