With the outbreak of the COVID-19 pandemic, installment payments have exploded in popularity along with a normal surge in online shopping. Among this installment, we are commonly hearing the term buy now pay later which is becoming increasingly popular with consumers. At first, this may sound convenient and easy, but it ultimately spells financial trouble for them.
When it comes to payment methods, credit cards and debit cards still reign supreme. However, people are fascinated with this type of scheme that allows them to purchase a product and then pay later. It is common for them to buy products without a budget and fail to make payments. This scheme is a way to rack up huge interest charges and debt.
What is Buy now pay later?
Buy now pay later (BNPL) is a new way for consumers to take on credit. It has become popular all over the world because it helps to break up payments into smaller instalments. People are unaware of or don’t understand how these payment methods work, which is how the trouble begins.
According to a recent study, the majority of people have signed up for buy now pay later plans. They ended up regretting their decision due to heavy interest rates, late fees, or other penalties, depending on the lender.
While these purchases may give you a short-term rush, in the long run, those huge amounts of debt will add up, hurting you in ways that aren’t just financial.
Here are the five reasons that you become a sore to debts.
- Investing in the products but unable to repay it
One of the biggest reasons why too much debt can hurt is that it reduces the ability to invest in other future products. People who intend to pay it later can come into the obstacle of rigidity with income inflow.
Holding on to debt means a large portion of one’s monthly income will be spent paying down debts, which is not feasible in the near future.
- Affecting the quality of life
When someone takes on debt, it means that they have to pay the EMI every month. This affects people on a monthly salary, and if their debt level is minimal, it may not bother them as much, although they should be aware of this. But, as the level of debt increases, that constant outflow can take a toll mentally. The hammering of debts gives a person stress and sometimes can even lead to major depression. It has a negative impact on the quality of life.
- Lowering the credit score
The credit score is a way to determine your creditworthiness. There are several factors that affect this score. Having too much debt or having a high amount of credit card debt will likely lower a person’s credit score.
- Holding you from achieving goals
You probably need a bank loan to invest in a new project. All banks do is check your creditworthiness.
If you’re holding such monthly debts, it becomes more difficult to get a new loan for further steps.
- Makes it difficult to cover your expenses
To stay ahead and cope with your daily lifestyle it is necessary to keep your account on track. As a result, when you buy a gadget on EMI, it may seem small. But, if the monthly payment is not made on the due date, it will affect your daily expenses.
Clearly, a payment method ‘Buy now pay later’ appears to be the easiest way to operate but could have a massive negative effect on your finances. We recommend you stay away from such schemes as they will affect your financial upbringing and result in regret over a large amount of money paid.
What should you do if you or someone you know has fallen into the trap of Buy Now, Pay Later?
If you or someone you know has fallen into the trap of Buy Now, Pay Later, there are solutions for you. SingleDebt can help cease harassment from these agents and handle the legal side for you. We urge you not to resolve this alone as this can lead to further harassment. Contact SingleDebt on +91 961 910 3594 or fill out the form either on the home page or contact page.