It's something that's becoming more popular with online shopping - buy now, pay later plans. They're convenient, but financial experts say they can be dangerous if you don't read the fine print.
"These products are named because you have to follow the letter of what they exactly say," said Michael Thomas with Greater Nevada Credit Union. "So you have to be able buy now and pay later. If you miss a payment, you're going to typically incur a fee, potentially high interest, and it could have a negative impact on your credit, which could hurt you down the line with something like a car or home loan."
It's a relatively new industry that really took off during the pandemic, when online shopping numbers soared - but there were consequences.
"There was a national study, and almost - 47% of people - that took out a buy now, pay later loan ended up missing a payment," Thomas said. "They also reported things like expensive fees, even having a negative impact on their credit score. So there's really nothing wrong if you stick to the terms and conditions of these plans, but when you say almost 50% of people are not paying their loans on time, this gives you the indication that this could be an impulsive decision, and that's never a good thing to do with your finances."
Experts say there are other options, and it's always a good idea to give these kind of purchases a second thought.
"You can look at things at any traditional credit union or bank, things like a personal line of credit," Thomas said. "Or putting together a savings plan. So if you really don't need that item and you're able to, try and put money away every week. Then you can pay for it altogether and there's nothing better than to be able to make a big purchase and not having any debt. So we encourage you to look at all the options, but the best one is always saving for something if you have the ability to put it off."
More about buy now, pay later loans: https://www.gncu.org/Resources/Education/Blog/October-2021/Buy-Now-Pay-Later
