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Hello Reader,

Buy Now, Pay Later loans were once a happy medium between not having enough cash to make a purchase and being reluctant to use a credit card. However, recent research shows that many consumers are having trouble paying back what they owe.

According to a survey by LendingTree, 41% of users over the last year made late payments on their loans. Further data revealed that 14% of BNPL users rely on loans to pay for groceries and other necessities.

This new reliance on BNPL loans may be the result of how much BNPL services are being offered across different companies and the rising cost of living.

For instance, Walmart is one major store that has partnered with BNPL companies like Klarna and Affirm. Earlier this year, DoorDash also took on BNPL services. And these are just two of several big brands partnering with BNPL companies.

Rising debt amongst consumers

Could the availability of debt options be contributing to the rise of U.S. consumer debt, which hit a record of $18.2 trillion in the first quarter?

It’s hard to say, but the prevalence of BNPL doesn’t seem to be going anywhere. The Trump administration has been loosening the restrictions that Biden had placed on BNPL providers, which will provide less protection for consumers.

BNPL loans seem to be affecting multiple groups of people. They are enticing for people who want to buy a new couch but don’t have all the money yet. They can also be a welcome relief for someone who needs to buy groceries in between paychecks.

While relying on these loans can have some advantages, there are certainly many risks.

Using BNPL responsibly

Whether you use BNPL loans or are thinking about using them for a purchase in the near future, here is what you need to know and how to protect yourself:

1. Understand how BNPL loans work

Buy Now, Pay Later loans can often feel like free money because you’re not entering your card information. Usually, when you make a purchase, you can select the option for “Buy Now, Pay Later”, fill out a form on the loan provider's website, and get approved in minutes.

Saying yes to BNPL is saying yes to a short-term loan that you will have to pay back within an agreed-upon amount of time. If you fail to do so, you can be charged late fees, be reported to collections, and see a negative impact on your credit score.

It’s important to understand the terms of your loan, know how different loan companies work, and always keep in mind that you will have to pay back the money.

2. BNPL is still debt—even if it feels different

Swipe a card and you get to take home a new pair of shoes. Unlike credit cards and bank loans, where there’s a longer process, you can be approved for a BNPL loan in minutes.

Because of this ease, it may not feel like you're borrowing money. You might not even feel like you have debt because the payments are broken up into smaller increments.

However, it’s important to remember that BNPL loans are still debt because you ultimately owe money to a company. So, before choosing the BNPL option, ask yourself: Do you really want to create or have more debt?

3. Track every BNPL purchase

So, say you’ve taken on some BNPL loans, or you understand the risk and feel like you can financially handle it (No judgment here); We’ve got some tips to help you stay on top of your bill payments:

• Keep a running list of what you’ve committed to pay—dates, amounts, and platforms.
• Add the amounts you owe to your budget so you can make sure you're allocating the right amount of money.
• Set calendar reminders or use a budget calendar to remind yourself of when things are due.
• ​Link payments to your bank account to avoid missing due dates.​

4. Watch out for repeat use traps

While BNPL loans and apps might seem like your friend, they only want you to spend money. You might get reminders on your available balance or be enticed with an easy payment plan. Seeing messages that promote a payment plan of $20 a month for 8 months doesn’t sound unreasonable.

However, it's gambling with your future money. BNPL encourages impulse spending by making purchases feel smaller and more manageable, even when your budget says otherwise.

You're committing to payments that can stack up fast, especially if you’re juggling multiple BNPL plans at once. And if something unexpected comes up, like a job loss, emergency expense, or a dip in income, you’re still on the hook for payments.

5. Know the risks to your credit

Because BNPL doesn’t report to the credit bureaus—for now—you might think that a few late payments won’t hurt your credit score. However, many loan companies do report missed payments to collections.

And even though paying your loan on time is important, it won’t improve your credit. But if you miss a payment, it’ll definitely come back to haunt you.

6. Start moving away from using BNPL for essentials

If you find yourself relying on these loans to pay for groceries or toiletries, then it might be time to assess your finances. Take a look at where your income gaps may be. You may need to adjust your spending habits.​

We’ve all had those moments where it’s a few days before our paycheck and we just need a little extra money to get by. A BNPL loan is tempting, but it’s not the only option.

Consider trying out different budgeting methods to help you better allocate your money.

Likewise, focus on building an emergency fund that you can use when your cash flow is low, instead of relying on credit and loans.

7. Create a spending pause

Sometimes it’s best to go cold turkey and cut yourself off from spending. Consider doing a no-spend challenge to help you prioritize your spending.

You can also try a savings challenge and put your energy into saving rather than spending.

Any money that you would have spent—or money that you’ve saved—can go into a savings account or toward paying off your debt.

Creating the Life You Want Without Accumulating Debt

Many of us fall into BNPL traps because we like the freedom and options it gives us. We all want nice things, whether it’s a new phone, stunning jewelry, or simply buying name-brand cereal.

We’re here to show you that you can have nice things without relying on debt to have them. Here’s what you can do:

1. Decide which experiences matter to you the most

Life is hard, so it’s important to treat yourself. However, the key to treating yourself while also maintaining financial stability is to decide what’s worth splurging on.

Spa visits, treats and toys for your dog, manicures, or new shoes—whatever brings you the most joy is what you should budget for.

Instead of relying on credit to buy the things you desire, focus on budgeting for those items. Put aside a set amount of money to splurge on that thing that just makes life sweeter.

2. Put yourself on a budget

It’s the b-word again. Yes, a budget is a better tool to use than any credit card or loan service.

Remember that a budget is simply a plan for your money. It’s a way to hold yourself accountable and a way to start affording the lifestyle you want to lead.

A simple way to get started is to list out your mandatory expenses and allocate part of your income to them. Whatever you have left over, decide how you will spend that money. If you don’t have enough left over for what you want, consider reducing your expenses or increasing your income.

A budget can be as simple or as complex as you need it to be.

3. Look for discounts

You know that rush of adrenaline you get when you make a purchase? Imagine that same feeling but doubled because you not only bought what you wanted but also saved money.

To obtain this magical feeling, shop around for discounts.​

Discounts can often be found by shopping at different stores, using coupons, shopping during sales, or being a member of certain companies, such as AAA.

4. Shop secondhand/preowned

One of my favorite things is buying secondhand clothes or doing clothing swaps with friends. When you go thrift store shopping, you often find unique items that are better suited to your style.

And of course, you can find cute items and name-brand clothes for a fraction of the cost of department store prices. Remember, you can shop secondhand both online and in person.

5. Focus on quality over quantity

Here’s something you’ve probably heard before but may not have fully embraced: less is more.​

Instead of splurging on quantity, invest in quality. High-quality items offer greater enjoyment and longevity, eliminating the need for frequent, costly replacements.

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You deserve to live a life of financial stability, where you can pay your bills and not have stress over paying $8 for a latte.

Remember that sticking to financial principles such as budgeting, not relying on debt, and spending less than what you make will help you experience more peace around money.

And if you need help creating a better financial foundation, check out our free course on destroying your debt. ​

• Need even more support? Check out our one-on-one coaching offerings!​

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📰 Interesting financial news

• ​Forgotten' 401(k) account fees can cost workers thousands in lost savings. (NBC News)
• ​Student loan forgiveness paused for borrowers on IBR (Income based repayment) plan. Here’s what to know (CNBC)
• ​Tariffs Put Spotlight on ‘Shrinkflation’ and ‘Skimpflation’. (SoFi)

📈 What’s popping in the stock market

• ​Chipotle stock sinks after company reports second straight quarter of sales decline. (Ticker Symbols: CMG)
• ​T-Mobile leaps after Q2 subscriber surge and fresh guidance boost.(Ticker Symbols: TMUS)
• What emotion is driving the stock market today? Check out CNN’s fear and greed index.

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📖 On the blog

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• ​How To Get Out Of Debt On A Low Income​
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Team CGF
(Bola & Kiersten)

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