Can buy now, pay off loans later be a good idea?
OPINION: In one fell swoop, Afterpay gave away buy now, pay later the moral right to self-regulate.
The news that he gets drunk now, pays loans later for people to buy booze from a hapless liquor store in Auckland has sent a clear message that the industry of buy now, pay later (BNPL) is not to be trusted to do the right thing.
The argument for buy now, pay later has always been that it’s better than other forms of lending; cheaper, safer, easier.
Better is not alcohol loans, and I now expect the government to regulate BNPL loans requiring affordability checks, minimum standards for hardship processes, and possibly a ban on loans for buy alcohol.
* Experience the dangers of “in-app” advertising via Afterpay
* Do buy-it-now and pay-later platforms harm our children?
* The buy now, pay later dilemma: How regulated should the latest form of consumer debt be?
Regulation won’t kill BNPL, so we the public can continue to make our own BNPL decisions – good, bad and indifferent.
BNPL are interest-free loans, which allow people to buy things they cannot afford now and pay them back in regular installments.
There are good uses for debt and there are bad uses for debt, although in the long term everyone should aim to live without consumer debt unless they consider it to be on this Earth to enrich lenders and merchants.
Car loans and home loans used to be called “good” loans.
Cars got people to work, and homes “appreciated” assets and were the basis of family wealth and stability. It made them good.
Good and bad are simplistic beacons. There is such a thing as spending too much on a car, for example. But the concept of good debt/bad debt is valid.
By looking at where Afterpay, Laybuy, and Zip are accepted, you can see some potential “good” uses.
As a way to deal with an unexpected dental or vet bill, I can see the appeal.
Someone getting a job interview might need a decent suit.
Someone replacing a broken refrigerator could use it.
A person with a low but stable income, such as a disability benefit, could use BNPL to get the things they need to live decently and spread out the repayments.
A family in need of school uniforms or a “bring your own device” device for school work could turn to BNPL.
Care must be taken that BNPL does not become a habit.
Isolated “good” uses can become a model. BNPL lenders offer you a revolving line of credit, which can be repaid whenever it is repaid. There is a lot of temptation there.
BNPL lender apps market countless ways to make retailers rich by exchanging your money for their business.
But while there are good uses for BNPL, bad uses are the core business of BNPL lenders.
It’s selling a lifestyle to young people, especially women. Afterpay and Laybuy are fashion apparel, cosmetics, vitamin pills, and designer homeware and giftware.
These are not things that no one needs now. If you can afford BNPL payments, you can afford to wait and save for them.
But it’s not hard to detect the suggestion that there are more than a few people buying necessities like medicine and groceries with BNPL.
The 10 most popular stores for Zip include The Warehouse, Chemist Warehouse, and Mad Butcher.
Buying groceries, or meat, on BNPL is a tragedy.
Buying luxury consumer goods using BNPL is becoming a way of life for many.
A government survey of 1781 BNPL users found:
- 44% used BNPL at least every two weeks
- 75% had more than one BNPL account (18% had four or more)
- 76% also had overdrafts, credit cards and personal loans
- 20% had missed BNPL refunds
- 9% had postponed paying bills or buying basic necessities due to their debts with the BNPL
It’s not a way to live. It will help you stay poor.
- The BNPL is in debt and is not without risk
- Save for consumer luxury
- Do not live to enrich others