My Buy Now, Pay Later Debt Almost Landed Me In Court

Buy now, pay later (BNPL) schemes are popping up everywhere, tempting more and more young people to splash their cash on sofas, kitchens, exercise bikes and laptops. It's easier than ever to spread the cost of purchases, regardless of whether you have cash in your bank account.

There are many BNPL services available, such as Klarna, Clearpay and Laybuy, which allow consumers to spread the cost of their purchases from retailers such as H&M, ASOS and boohoo over several weeks or even months. Some online retailers have their own exclusive BNPL schemes, which include store cards.

In the last 12 months, as many as 10 million people have used these schemes. According to a new report by payment processor Worldpay, buy now, pay later plans for online shoppers are growing rapidly at a rate of 39% a year, allowing customers to delay payment or purchase in interest-free instalments.

But with so many of them aimed at 18-35-year-olds, there are concerns that they could send users spiralling into crippling debt. Many have shared their experiences on Twitter, with one user remarking: "Using my paypal loan to pay off klarna debt." Another said: "Sooo as you all know i got myself into a fuck load of credit/store card debt in 2017, totally to around 3 grand, which i couldn't even dent into monthly due to extortionate interest rates. today i finally (without realising) paid off one card!!!! i'm so fkin happy."

According to a survey by comparison website Compare The Market, nearly 40% of people aged 25-34 who had used these schemes said it had damaged their credit score. The research also found that this age group is particularly dependent on BNPL.

Thirty-year-old Louise* from Birmingham says these schemes almost ruined her life. "One day I was shopping [in Topshop] and it was 10% off if I opened a store card," she tells Refinery29. "I knew I had the money in my bank account to pay for my purchase but the allure of spreading out my costs and a discount seemed too good to pass up." Louise says she signed up straightaway and walked out of the shop without spending a penny. "I was then able to spend the cash in my bank account on other things, like beauty products and shoes."

When Louise maxed out her credit limit on her store card, she turned to more BNPL schemes on other websites. "When I realised that I could buy clothes online and pay nothing at the checkout, I started looking for online shops that I could sign up to and do a massive clothes haul. It was so easy."

What she didn't realise was that she had to make the minimum payments each month, which she failed to do. "I was 18 at the time and I wasn't aware that I had to manually set up a direct debit. No one teaches you about borrowing money or credit, I was naive to think I could use what I thought was 'free money' without any consequences."

Those consequences were damaging. "I started receiving letters through the door. They were asking me to pay. I wasn't earning very much at the time and the idea of dropping £50 a month to cover the repayments was unmanageable, at least in my head. The repayments kept increasing each month because I was getting fined for missing payments, and the interest was insane. I couldn't manage. At one point, my balance was over £500."

Louise started to receive daily phone calls from debt collection agencies demanding payment, which made her worried. She ignored the phone calls and the letters. "I thought it would all go away if I just ignored them all," she says. "You know, out of sight, out of mind."

But it didn't go away. It got worse. One day she opened a shocking letter. "It was from the debt collection agency, stating that my case had been escalated. They said they would be taking me to court if I didn't settle the payment. They had even set a court date."

Louise says this was the terrifying moment that made her take action. She rang the debt collection agency and arranged a payment plan. While this was a positive step in the right direction, her credit score had already been damaged. "I had defaults on my credit record, which meant I couldn't get credit elsewhere. The mistakes I made when I was 18 have been detrimental. Getting in years' worth of debt for a £45 Topshop dress really wasn't worth it."

There are many young people like Louise facing debt due to BNPL schemes. In a recent survey by PayPlan, one of the UK's leading free debt advice providers, 73% of its 18-35-year-old clients said that using a BNPL scheme had contributed to a debt problem.

Rachel Duffey, CEO of PayPlan, tells Refinery29: "While some buy now, pay later schemes can be a convenient way of spreading the cost of purchases at an expensive time of year, we think they need to be approached with caution.

"We have certainly seen a worrying increase in the number of young people coming to us for debt advice. It's very easy to get seduced by how appealing these payments options are, especially for younger generations. We think both the regulators and the service providers themselves need to step up now to ensure this type of lending doesn't cause financial harm to future generations."

If you have BNPL debt, PayPlan recommends you try to pay it off on time to avoid the possibility of charges and further debt. This can be done by prioritising your spending and focusing on paying your debts before making any 'luxury' purchases. You may have to cut back on treats for a while but it will be worth it in the long term. And before signing up to a BNPL scheme, take a step back and think about the reasons why you'd use a service like this.

*Name has been changed to protect identity.