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If you've taken out a buy now, pay later (BNPL) loan, you already know they are relatively easy to get. They are often offered as you check out, with 25% of the purchase price due immediately and the rest in equal payments due two weeks apart. In most cases, there is no interest charged.
Paying them off may not be quite as easy as qualifying, though, particularly if you don't add the payments to your budget or calendar of due dates right away. Here are five steps you can take to pay off your BNPL debt.
1. Update Your Budget
Just one small additional payment may seem like it's going to easily fit into your budget. But without a plan, it can be easy to forget, and suddenly a convenient payment option can generate fees and interest. Keep in mind that buy now, pay later payments may not be due on the monthly or 30-day cadence you are accustomed to—or are included in a typical budget.
And if you don't have a budget? You're far from alone. You can use this as an opportunity to create a budget, track your spending and reduce unnecessary expenses to help ensure you can pay off your BNPL purchase.
2. Set Up Autopay
Some BNPL lenders require automatic payments from your savings or checking account. That means that when payments are due, you are authorizing the lender to pull the amount due out of your account. So it's essential that you have enough money to cover the amount due. Otherwise, an attempted debit could trigger fees from the lender and the financial institution.
If the BNPL provider doesn't require automatic payments, you'll need to track due dates to ensure you don't trigger a fee with a late payment. Instead, consider setting up autopay for the account so you never miss a payment. Getting payment alerts or setting reminders on your phone can help you make sure you have enough money in your account.
Check the terms on any new buy now, pay later loan. Company plans may differ, and what you thought you understood from a previous experience may no longer be true. Apps may also offer multiple payment options, not all of them the traditional "pay in four." Be certain you know when bills need to be paid.
Also, be careful about adding new BNPL loans as you pay off your existing one. The Consumer Financial Protection Bureau (CFPB) notes that such loans can encourage overextension. Some BNPL lenders offer apps that help you track multiple loans.
3. Change Your Payment Due Date
Some BNPL lenders will allow you to change your payment due date or to extend a payment due date; however, the service is not always free. If, for example, you'd prefer due dates to align with your paychecks, you can see if your lender allows this. If you are requesting an extension, be aware that the lender may not allow you to do this more than once in a four-payment cycle.
4. Look at Your Other Options
BNPL loans are designed to accommodate impulse purchases. The CFPB reported that the average loan in 2021 was $135. That's probably not so much that you need to consider other options unless you have several BNPL loans or you have a type that offers a longer term and higher limits. If you're looking at a significant sum, consider whether a debt consolidation loan is a better option for you.
5. Reach Out if You Have a Hardship
Some buy now, pay later lenders might be willing to work with you if you're having difficulty making payments.
More than 10% of BNPL borrowers have been charged late fees, according to a CFPB report. If you possibly can, it's best to make arrangements to pay before you miss a payment and face consequences. A missed payment can:
- Freeze your account so that you cannot make further purchases
- Trigger late fees or other penalties
- Result in a collection account, which could badly damage your credit
Even if the amount is relatively small, the effect of not paying a BNPL loan could be large. On-time payments of BNPL loans are not routinely reported to the major credit-reporting agencies, but debt collection accounts are.
If you're struggling to stick to your BNPL payment terms, contact the provider before your payment is due to find out what assistance they may be able to offer.
The Bottom Line
Keeping up with buy now, pay later payments can help you avoid fees and interest on these short-term loans. Most BNPL loans are relatively small, but carrying multiple ones with different due dates can become hard to manage. It's typically simpler to have a budget that can accommodate an occasional unplanned purchase. But if you have a BNPL loan, use the strategies above to help you maintain on-time payments without getting into a financial bind.