Buy Now, Pay Later (BNPL) schemes have taken the world by storm, especially with younger consumers.  They can get the immediate gratification of the new item, and spread the cost – something that is particularly attractive to young adults currently, although the scheme is now increasing in popularity for older consumers.

The popularity of these schemes stems from the user’s ability to spread payments over a period of time, without added interest. For example, they may pay in 3 installments over 30 or 60 days. However, if payments are missed, paying this way does start to become a costly alternative with late fees and charges being applied.

Something like this may seem too good to be true, and it usually is. So, we’re here to talk about the dangers of using BNPL schemes, as part of our effort to help members with their money management.

1. BNPL schemes are currently not regulated by the Financial Conduct Authority. This means that they do not have to carry out affordability checks before lending, which means lots of people who can’t afford the payments are incurring debt and late fees.
2. If something goes wrong with your BNPL agreement, you’re unable to take it to the Financial Ombudsman, which only look into disputes about products or services that are FCA regulated, so consumers are not protected in the same way as with a credit card or loan from a regulated lender.
3. Late payments can incur fees and even damage your credit score. What lots of people don’t realise is that Buy Now, Pay Later schemes are a form of credit (point of sale credit), as with any loan. Failure to repay the loan can result in fees, and have a negative effect on your credit score. The consequences of this are that other lenders may be less likely to offer you a loan or mortgage in the future, and if these schemes become regulated by the FCA, they may not allow you to use their services. Many people have been referred to debt collectors for late payments, which also comes with further consequences.
4. It is important to note that because these schemes only do soft checks, your credit limit is based on each individual provider. Therefore, you could accumulate a large amount of debt across several providers, which you may not be able to afford and other lenders cannot see this on your credit file.
5. With these schemes growing in popularity, it can be easy to accumulate a large amount of debt. If we have smaller payments as opposed to one lump sum, it can make the total seem less daunting, but this can cause problems with monthly budgeting if you have several debt repayments to keep track of.

 So, where do we come in?

1.  Wave Community Bank offers affordable loans, which ensures you can afford the repayments when you apply for the money you need. We will never lend more than you can afford to repay.
2. We offer money management advice. For example, do you really need that item? Would you purchase it if you had to pay in full in cash? Download our Wave Money Guide here [link] for money management advice and budgeting tips, or download the Quo Money app, which is free to members If you are struggling with your debts or repaying please seek professional advice.
3. Our debt consolidation loans can help you get out of debt and repay the money at a rate that is more affordable to you.
4. Our loans all include a savings element to promote better money management and budgeting. So as you pay back your loan, you are creating a savings pot to better prepare you for the future.
5. We are authorised by the Financial Conduct Authority and regulated by the Prudential Regulation Authority and the Financial Conduct Authority.

"I would just like to say thank you for the service given to me. At the time no other bank would help me. I am now debt free and able to continue to save the money I was paying to my loan"

-Member