The last two Board Briefs on this subject we layed out what Buy Now, Pay Later (BNPL) services are (a financing product) and when you might consider using a BNPL financing option (only on rare occasions).

So, what are the circumstances where I should NOT consider a BNPL financing option?

There are many examples.

• Any item that has a short lifespan (less than the financing term of the BNPL option).
• Anything perishable, like groceries, clothing, entertainment, travel, etc.
• Anything that is a nice to have, but is not a need, like furniture, a stereo system or a TV, especially when you already have furniture, a stereo system and a TV.

All these things fail the test for when you might consider a BNPL financing option. By way of reminder, here are some factors that we listed in our previous Boad Briefs on BNPL options.

• The item to be purchased is a need.
• The item is necessary for your ability to generate income or has a capital purchase (appliance, roof for your house, etc.)
• The term of the BNPL is within the useful life of the item being financed.
• You can pay for the item, monthly, within your current budget.

In the end, what you are considering is how this purchasing decision affects your budget, now and in the future. Can I afford it now and throughout the life of the BNPL agreement?

If your budget says you cannot afford it, then you are running the risk of, at best, exceeding your budget causing you to cut other expenditures, or, at worst, incurring unplanned interest and late fee charges if you fail to meet the terms of the BNPL agreement. Remember, such interest and fees can be levied on the entire original purchase amount even though you have been paying on the item for several years.

WHAT TO DO? Think about it.

• Do I really need this purchase?
• If so, is there a better way to pay for this purchase?
• Does my budget allow for this additional monthly expense?

Don’t just sign on the dotted line. Read what you are about to sign to fully understand what you are committing yourself to.

OUR ADVICE
BNPL no-interest offers can be financially a wolf in sheep’s clothing. Be purposeful and thoughtful about your purchases. Make sure you are correctly looking at a purchase for what it really is; a need verses a want.

Whatever your financial need, we’re here to help.