In difficult times like these, resorting to Buy Now Pay Later (BNPL) can seem like a lifesaver. Used carefully and with full understanding, it can be a good way of spreading costs for items you can’t immediately afford. The problem is that many consumers don’t fully understand the terms and, as recent research by TotallyMoney shows, repayments can very quickly build up.
What Is Buy Now Pay Later?
BNPL is simply a form of credit agreement, under which purchases can be paid for over a set number of installments. The biggest attraction, compared with traditional credit agreements, is that these arrangements are interest free — provided that repayments are made on time.
It’s not hard to see why this has become popular during the cost-of-living crisis. According to Alastair Douglas, CEO of TotallyMoney“In recent years, people’s finances have been put under huge amounts of pressure, meaning they’ve had to cut back on spending, dip into savings, or turn to credit to make ends meet. And with traditional providers tightening their lending, or pulling out of the market altogether, buy now pay later has, for many, helped plug the gap.”
What’s the Problem With BNPL?
aking on a BNPL agreement as a one-off, with a clear plan of how to meet the repayments, is a perfectly sound approach to purchasing. However, TotallyMoney’s research shows that people are, on average, taking on four BNPL agreements a month. Since agreements vary, this could mean anything from 12 to 24 payments — and it’s often repeated month after month.
This can make it difficult to keep track of what payments are due when, and the research suggests that 22% of BNPL users have missed a payment. Missing payments can result in late fees being imposed, increasing the debt each time it happens and having a negative effect on your credit rating.
Does BNPL Affect You?
As a small business owner, you may not be immune to the effects of the cost-of-living crisis — or to the lure of BNPL. As long as you plan it ith the care you (hopefully) apply to your business finances, you shouldn’t have any problem. Perhaps, though, you can avoid the need if you make sure your credit control is working to the highest efficiency.
On the other hand, you may find that your customers are having problems paying you because they’re not using BNPL wisely. The best course in this case is to call in a debt collector who, rather than going in hard, will help you work with debtors who are in trouble and ensure that you’re paid as soon as possible.
That’s exactly what I can offer. Give me a call to find out how I can help get the best possible results from debtors who’ve fallen into the BNPL trap.
