6 positive and disadvantages purchased now, subsequent loans: npr

You shop online. You are getting ready to buy. Then you see a choice that you start to see more often on the checkpages: “Pay in four easy parts.”

You are interested. But you can also think: What is the catch?

“Buy now, pay later” loans, as stated in the financial industry, are an alternative credit form and operate the way they sound. Buyers take money to get the goods immediately and then those loans pay back from time to time, often say interest-free Ed DehaanProfessor of graduating schools of Stanford University.

Within the past ten years or soRetailers offer this service from Klarna, Approval and Aforper to the Grand Pianos from both online and groceries.

Now, if you are interested in purchasing, then pay (BNPL) and spend a shot, give a shot, says Dehaan, who studies the effects of users’ BNPL on financial health. “Be very careful in the same way for any credit product.”

Here’s to be taken into account before taking a loan before a purchase.

Pro: You can get a quick loan without a hard credit check.

For people with no or limited credit history or those who are worried about taking a credit account, BNPL loans can be a suitable way to empty cash flow.

Unlike credit cards and bank loans, BNPL loans often do not require a hard credit check. Instead, financial companies can use alternative information to determine the correspondence of loans. They can make a soft loan check, which is an investigation of your credit history, which does not look at your scanning habits or shopping profile or does not affect your credit account.

You usually know your approval for a loan within a few seconds. In many cases, the application process provides a little more information from the main contact information, birthday and payment form.

John: This can be excessive to rise and “debt”.

Quickly, the downside of access to loans easily? This can cause reproduction and impulse purchase, says Jennifer stripsGreat personal financial correspondent in the incider.

“People don’t see these loans like real money,” he says. “I would pay $ 100 today but then I just have to pay $ 10, then I’ve got $ 90 today to do anything else. I have almost a little money.”

Another important factor for borrowers is that BNPL does not provide information about credit bureaus. This means that the financial lending will not be the full picture of your debt. Thus, this purchases can facilitate the “debt stack” or multiple credit lines and simplify the oversight of these users.

Pro: Many loans come with interest-free and flexible payment plans.

Unlike credit cards that can connect consumers to high interest rates and repetitive monthly bill, many BNPL companies offer zero interest lending options with various payment schedules, says strips.

When used wisely, an interest-free loan can make large or unexpected purchases, more managing, says strips. For example, if you have a new pond and a new replacement on your credit card, the interest you have to pay on this surprise costs can hurt your wallet. With a BNPL loan, you can place this new phone price in a few months in a few months in accordance with the budget in accordance with the budget within a few months.

John: There may be hidden fees.

Read subtle printing before signing. No every The credit option is interest-free, says strips. Some companies can offer a sliding costs scale from the maturity or not only a percentage of a certain dollar. Many companies will pay delay fee for abducted payments, but these fees may range up to 25% for one late payment of one of the few dollars.

Pro: There is no long-term commitment.

BNPL loans are “one and prepared” transactions, saying Austin Kilgoreachieve an analyst in the digital finance company. Thus, after paying your loan, your relations with this BNPL ended.

This is a useful feature Everyone who fears commitment with a certain financial lender says. Because most loans are a certain number of payments, debt conscious buyers have freedom of testing various credit providers while escaping the “sustainable open credit line”.

John: Your bank account can be at the risk of overdraft.

Many companies may encourage or demand automatic payments for borrowers, so if you are not sober, it can be easy to overdraft information about it. research.

Just spending with a BNPL provider, says Kilgore, spending or scheduling payment reminders on your phone or financial planning app.

You can also review the timing of your payment schedule, says strips. It can help match your payments with your salaries.

Now, for more and negatively purchased, then pay, Listen to our Podcast episode.

The manufacturer is Clare Marie Schneider. This digital story was edited by Malaka Gharib. Visual editor beck is corrupt. We would like to hear from you. Leave a voicemail number 202-216-9823 or email us Lifekit@npr.org.

Listen to the life set Apple podcasts and Stainand sign up for us newsletter. Follow us on Instagram: @nplifelfit.