Buy-now-pay-later users ‘more likely to be in financial difficulty’

People who use buy-now-pay-later (BNPL) are more likely to have fallen behind with unsecured debt repayments than other borrowers, new analysis has found.

Research by Bank of England economists has found, in the past year, 21% of people who use BNPL have fallen behind by two months or more with the repayments on at least one form of unsecured debt. This compares to 6% of other borrowers. Unsecured debt includes things like credit cards, store cards and personal loans.

What is BNPL?

BNPL lets you delay paying for online purchases in two ways. You can either:

• put off paying for a purchase for 14-30 days
• divide the cost of a purchase into smaller amounts to pay off over a number of months

It’s an increasingly popular form of credit and is offered by providers like:

• Klarna
• PayPal
• Clearpay
• Amazon

Many BNPL products are unregulated because they don’t charge interest on repayments. People can still get into financial difficulties with BNPL though, as some lenders charge late fees. A recent survey by Creditspring revealed 47% of UK adults don’t realise you can get into debt with BNPL.

Other findings

The latest analysis of BNPL figures revealed financially vulnerable groups, such as renters and those aged 18-34, are most likely to use BNPL.

It also found 68% of BNPL users are worried about their level of borrowing. This compares with 45% of other borrowers.

On the other hand, the research also showed that the poorest households are no more likely than average to use BNPL.

In total, 11% of UK households (3.1m) owe money on BNPL. Equivalent to £2.7bn.

The average amount owed is £866. But the authors of the research say this figure is skewed, as lots of users owe a few hundred or less while a small number have much larger balances.