According to new research, Britons are more likely to use buy now, pay later services to buy fridges and washing machines than for clothes or a vacation.
Research by YouGov indicated that 44 per cent of people in the UK were willing to use BNPL for major home appliances, while more than a third said they would use it to pay for electronics such as TVs and laptops.
However, 37 percent said they would not use BNPL providers, which include the likes of Klarna, Afterpay and Clearpay at all.
Nearly half of Britons will use BNPL to pay for home appliances. Research by YouGov indicates that one in four now consider it one of their preferred forms of credit
The research indicates that shoppers prefer using BNPL to pay for big-ticket essentials like furniture (32 percent) and cars (29 percent), rather than treats like makeup (7 percent) or entertainment (8 percent).
Of the 2,000 UK adults surveyed, 20 per cent said they would use the BNPL scheme to travel abroad, using the service to post the cost of airfare and hotels.
Meanwhile, only 12 percent said they would use it to buy clothes, and 14 percent to buy video game consoles.
YouGov also compared the UK’s use of the BNPL to that of the US, finding that even fewer people (23 per cent) said they would not use it at all.
Almost a third of people (29 per cent) said they would use it for healthcare, compared to just 18 per cent in the UK.
However, the number of UK shoppers using these services has increased in recent years.
Customer transactions with Klarna alone increased 59 percent in the 12 months from December 1, 2020, according to data from TSB.
About 18 percent now use BNPL at least once a month, while 11 percent said they use it at least once a week.
YouGov also surveyed Britons on why they choose to use BNPL’s services when shopping online.
More than 40 percent suggested they used it because it is “interest-free so I can take advantage of it too,” while one in five said they use it because they don’t have the money to pay for things right away.
Research by YouGov indicates that more than a third would not choose to use a BNPL scheme to pay for home appliances, vacations or technology purchases compared to 23% of Americans
While many BNPL providers offer interest-free options, interest is often payable on larger purchases or those spread over longer periods.
It was important for consumers to know what they were getting when using these services, said Liz Edwards, editor-in-chief of the personal finance comparison site finder.com.
Pay Later is not a new or bad idea for itself, she said. Spreading out payments for an expensive item like a refrigerator or a car is reasonable, and there are many ways to do this with or without paying interest.
One in five said they would use BNPL for a holiday this year, using installment plans to pay for plane tickets and hotels
But there are many issues with using Buy Now Pay Later, all due to the fact that BNPL is unregulated, and any other types of credit are regulated.
Firstly, BNPL schemes do not do a full credit check to see if you can make the payments. This means that you may incur significant debts that you cannot handle.
Secondly, a lot of people using BNPL don’t see that they are borrowing money and don’t realize what they are signing up for. This means that it is easy to take on a large debt without thinking about what might happen if you can’t pay it back later.
Research by finder.com also found that nearly a third of Britons say they have purchased items they could not afford via BNPL services.
Edwards added: “There is research showing that customers spend more with BNPL. A European Payments Council report found that it increased ‘basket conversions’, increasing sales by up to 30 per cent.
This isn’t a problem in and of itself, but if you spend more without realizing the consequences of missing payments, you can get into deep water pretty quickly, with mounting fees and debt.
TransUnion to include BNPL in UK credit files
TransUnion, one of the three largest credit agencies, has announced that it will begin recognizing BNPL funding in credit filings starting in 2022.
This means that BNPL borrowing will appear on a TransUnion credit check when a customer applies for a loan, credit card, or mortgage, for example.
The agency said it wanted to protect consumers and ensure payment plans were affordable and sustainable.
It is the first credit reference agency to implement the change.
Sue Anderson, of debt charity StepChange, agreed, advising shoppers to keep in mind what she called “invisible debt” before using a BNPL.
She said: If you are thinking of using it to make large purchases, it is essential to keep in mind that even an interest-free credit can cause financial difficulties.
Make sure you understand the agreement you’re entering into, and think carefully about whether you’ll be able to meet all future payments comfortably.
She also noted that more regulation was needed to protect those at risk of significant debt.
She added, ‘While it may be tempting to simply view BNPL as a way to increase purchase affordability, it is important to remember that BNPL is deliberately marketed as a means of payment rather than as a form of credit, which it really is.
“There is currently little friction to prevent consumers from accumulating large amounts of BNPL debt.
“It is imperative that regulations act quickly to align this fast-growing lending market to ensure that consumers are better protected against the risks of financial hardship.”
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