Buy now, pay later services have experienced substantial growth, with providers originating nearly $157 billion in consumer credit products in 2025, compared to nearly $116 billion in 2024 according to Federal Reserve estimates. A LendingTree survey conducted in early July found that 44% of Americans anticipate applying for a BNPL loan within the subsequent six months, with 13% expecting to take out three or more loans during that period.
Consumers are increasingly turning to BNPL services not for luxury purchases but for essential expenses. Recent surveys indicate that 29% of BNPL users have used these services to purchase groceries, up from 14% in 2024. Additionally, 18% reported using BNPL loans for vehicle repairs or maintenance, and 13% used them to pay rent. A separate survey from the advocacy group Protect Borrowers found that 42% of BNPL borrowers used these loans for medical or dental care, while 39% used them for utility bills.
However, payment difficulties are increasingly common among users. Nearly half of BNPL borrowers, 47%, reported making late payments over the past year, up from 34% in 2024. While many BNPL plans offer zero-interest “pay in 4” structures with 25% due at purchase followed by three equal payments over six weeks, interest-bearing options have expanded significantly. In 2026, interest-bearing installment loans accounted for over 37% of annual BNPL loan issuance, nearly double the share from 2021. Late fees can reach $7 to $8 per payment, and combined interest and financing fees may reach 36%.
Credit counseling experts warn of potential debt cycles, noting that many consumers have exhausted traditional credit card options before turning to BNPL services. U.S. credit card debt reached $1.25 trillion in the first quarter, up 5.9% year-over-year. Industry representatives counter that BNPL services provide flexible payment options during an affordability crisis, while critics argue that fees and interest rates can transform small loans into arrangements resembling payday lending with effective APRs exceeding 100%.
Article Attribution | Read More at Article Source
Article summary produced by Claude AI