Buy now, pay later (BNPL) products create the perception of affordable payments, which can lead to overspending and financial risks, especially with the rising trend of loan stacking. This issue is particularly relevant for millennials and Gen Z, who often feel financially constrained and are looking for ways to manage their cash flow.

According to a recent survey, 39 percent of U.S. adults have used at least one BNPL service at checkout. If you’ve taken on multiple BNPL plans and are feeling overwhelmed, you’re not alone, and there are solutions available. It’s important to act quickly to avoid damaging your credit.

What is loan stacking?

Loan stacking refers to managing multiple loans or credit products simultaneously. While consumers often use this strategy to achieve goals like paying down credit card debt or payday loans, it has become a common issue with frequent BNPL usage. According to a 2023 Consumer Financial Protection Bureau (CFPB) report, credit stacking is a significant risk among BNPL users.

Unlike personal loans that require a hard credit pull, BNPL platforms typically use soft credit checks and bank account activity for approval. This means they don’t have a complete view of the user’s financial situation or creditworthiness.

The absence of strict guidelines, combined with an initial payment requirement of 25 percent of the total purchase, makes it easy for users to overspend, increasing the likelihood of default.

How stacking BNPL payments are affecting consumers

The latest CFPB report found that BNPL users carry significantly more debt—across retail accounts, personal loans, and student loans—compared to non-users. It revealed that nearly 95 percent of BNPL borrowers have a credit account, while only 86 percent of non-users do.

This higher debt burden may help explain why many BNPL users struggle with payments. According to the CFPB, they are more than twice as likely to be delinquent on a loan or credit product for 30 days or longer.

Additionally, users typically exhibit higher utilization ratios. The report states, “In addition to having lower savings and liquidity, respondents who used BNPL in the past 12 months showed higher levels of credit card debt and credit card utilization rates compared to non-BNPL users.”

What to do if you’re struggling with your BNPL payments

If you’re struggling to keep up with your BNPL payments, there are several steps you can take to regain control of your finances:

  • Seek a payment extension: Some BNPL platforms allow you to extend your payment deadline, which can prevent late or missed payments. For example, Klarna offers a 14-day payment extension upon request.
  • Contact your lender: If extending your due date isn’t enough, reach out to your BNPL provider and inquire about hardship programs they may offer. These programs can be particularly beneficial if your financial situation has changed significantly since you first took out the loan, such as experiencing reduced hours or job loss.
  • Use a 0% introductory rate credit card: If you qualify for a credit card with a 0% introductory APR, consider transferring your BNPL balances to this card. This strategy allows you to pay off your balance interest-free for a limited time. Be cautious not to accumulate more debt on the credit card and ensure you can repay the transferred balances before the introductory period ends to avoid higher interest rates.
  • Consolidate your debt: If you have multiple BNPL balances totaling $1,000 or more, think about applying for a debt consolidation personal loan. This approach can streamline your payments and potentially lower your overall interest costs. However, it’s crucial to have a good credit score to secure a lower interest rate than what you currently pay on your BNPL products. Otherwise, you might end up paying more in interest charges over the loan term.

Taking these steps can help you manage your BNPL payments effectively and avoid falling further into debt.

In Conclusion

It’s easy to lose track of your spending with BNPL, which can lead to financial issues, especially if your circumstances change. If you’re struggling to keep up with multiple payments, there are steps you can take to regain control, but you may need to assess how you got into this situation first.

Once you have a clearer understanding of your finances, explore the repayment options available to you. However, continue making your monthly payments until your balances are fully paid off.

Ultimately, you may need to reassess your budget and consider stopping the use of BNPL services. Avoid online shopping at retailers that offer BNPL to help stabilize your budget and prevent accumulating more debt.