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Understanding Buy Now, Pay Later Services

 

Keeping up with the latest financial products and services offered to consumers can be a challenge. This month, we look at Buy Now, Pay Later (BNPL) products, a type of small dollar installment loan that is typically interest-free for consumers. This unsecured loan is often offered to consumers at the point of sale online or in-store, allowing them to pay in four or less equal installments, with typically 25 percent of the total due at the time of sale.

When payments are made on time, a BNPL loan is typically free to consumers. The cost of the installment loan is often shouldered by the merchant, which is one of the many reasons the popularity of this product is growing so fast. Those without good credit scores may qualify easily, with no credit check or only a soft inquiry to the consumer’s credit report to verify identity.

However, if the consumer falls behind on making payments on one or more BNPL products, costs add up quickly. Late fees can be charged, and collection companies can report a past due payment as a delinquency on their credit report. If consumers take out more BNPL loans than they can manage, debt payments can spiral out of control quickly.

BNPL products can seem very appealing to consumers. However, these products do not provide the same levels of protection that credit cards offer for disputes on purchases, reporting, and reasonable fees. Join us for our webinar on March 22 for more details on BNPL and how consumer protections, like the Military Lending Act, may apply to this installment loan product and to similar point-of-sale installment loans.

For additional content related to working with clients on personal financial issues, visit the OneOp Personal Finance Team. Free CEUs are available for AFCs and CPFCs through our webinars.

Written By:
Dana Carlyle
Edited By:
Selena Garrison
Program Coordinator

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The Extension Foundation was formed in 2006 by Extension Directors and Administrators. Today, the Foundation partners with Cooperative Extension through liaison roles and a formal plan of work with the Extension Committee on Organization and Policy (ECOP) to increase system capacity while providing programmatic services, and helping Extension programs scale and investigate new methods and models for implementing programs. The Foundation provides professional development to Cooperative Extension professionals and offers exclusive services to its members. In 2020 and 2021, the Extension Foundation has awarded 85% of its direct funding back to the Cooperative Extension System, 100% of funds are used to support Cooperative Extension initiatives. 

This technology is supported in part by New Technologies for Ag Extension (funding opportunity no. USDA-NIFA-OP-010186), grant no. 2023-41595-41325 from the USDA National Institute of Food and Agriculture. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or the Extension Foundation. For more information, please visit extension.org. You can view the terms of useat extension.org/terms.

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