Buy now, pay later apps are an increasingly popular way tofinance purchases.
Pay-in-four loans are a common model.
It may seem like an attractive alternative to credit cards, because pay-in-four plans dont charge interest.
Pretty tempting, right?
Thats the whole idea.
But buy now, pay later isnt free money.
Its a short-term loan, and the business model is sounding alarms from regulators and consumer protection advocates.
PIRG, a consumer advocacy group.
Its a come-on to spend more.
However, BNPL loans impact your credit in other ways.
That means on-time payments dont help boost or build your credit score.
Credit reporting agencies are attempting to reconcile this with BNPL companies, but its a work in progress.
On the other hand, missing a BNPL payment can still hurt your credit.
Drowning in Expenses?
Maybe youre scrambling after your car broke down.
Or you got a medical bill you werent expecting.
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You could get saddled with a big car payment while still paying off BNPL loans.
It can be easy to miss a payment when you have a lot of individual bills, Red said.
Some might not charge a late fee at all, like Affirm and PayPals Pay in 4.
If you run into overdraft fees can be costly,averaging about $30.
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This makes it easy dangerously easy to overspend.
But those small payments add up to very large payments very quickly.
BNPL makes it easy to make impulse purchases, Red said.
That can quickly spiral into spending more than you could afford.
So even when youre trying to save money andstick to your budget, these companies are making it harder.
BNPL plans dont qualify for this, so each provider plays by its own rules.
Here are a few tips to prevent you from getting overwhelmed with buy now, pay later bills.
Need a Hand With Bills?
Listen, we know its tough out there.
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Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.
She focuses on retirement, credit, investing and life insurance.