Buy now, pay later services have been on the rise as more consumers look to short-term installment financing options to help them manage the rising costs of daily necessities, not just pay for discretionary purchases.
BNPL providers originated nearly $157 billion in consumer credit products in 2025, up from nearly $116 billion in 2024, according to Federal Reserve estimates.
Meanwhile, a new LendingTree survey shows that 44% of Americans expect to apply for a BNPL loan in the next six months, including 13% who expect to take out three or more in that timeframe. The site polled 2,000 consumers earlier in July.
Yet falling behind on payments could result in a vicious cycle of debt, experts say.
“Often they just, they’ve exhausted their credit cards, and buy now, pay later is their only option,” said Jim Triggs, CEO of Money Management International, a non-profit credit counseling firm.
Credit card debt in the U.S. hit $1.25 trillion in the first quarter, up 5.9% from a year earlier, according to the Federal Reserve Bank of New York.
Consumers using buy now, pay later for necessities
Ashley Reed and her mom Regina Perez.
Courtesy: Ashley Reed
Ashley Reed tells CNBC she became a frequent BNPL user two years ago, after tapping out her credit cards to help pay caregiving expenses after her mother suffered a ruptured brain aneurysm while they were vacationing together.
“I wound up maxing out my credit cards to get hotel rooms and things like that to stay with her and to get her transferred back to Baltimore. It was about $2,500 for an ambulance ride, and so, completely maxed out my cards,” said Reed, now 40, who has a full-time job as a paraeducator and also works part-time as a radiology assistant.
Having reached her credit limit on her cards, Reed said, she turned to BNPL services to help make ends meet, including for groceries.
She’s one of a growing number of consumers doing so amid inflation and other price pressures, such as higher gas prices stemming from the U.S. war with Iran.
Nearly a third, 29%, of buy now, pay later users said they’ve used these short-term loans to buy groceries — up from 14% in 2024, according to a separate March survey from LendingTree of more than 2,000 adults. About 18% said they used a BNPL loan for car repairs or maintenance, and 13% used it to pay their rent.
More recently, a survey by the consumer advocacy group Protect Borrowers found that 42% of respondents who have used BNPL loans did so to pay for medical or dental care, and 39% to pay utility bills. Data for Progress, a progressive think tank, polled 1,164 U.S. voters online on behalf of Protect Borrowers in early July. The survey draws on a subset of 438 individuals who have used BNPL loans.
Missing BNPL payments can be costly
Keeping up with BNPL payments can be challenging: Almost half of users, 47%, said they’ve paid late on a BNPL loan in the past year, up from 34% in 2024, according to Lending Tree’s March poll.
“We’ve also seen that a lot of consumers are missing payments,” Triggs said. “It’s definitely a big issue, a big problem.”
The majority of BNPL loans have a so-called “pay in 4” plan with no interest. Payments are often made in four installments — a 25% down payment at the time of purchase, followed by three more equal payments over the next six weeks.
However, some BNPL services, like the ones Reed uses, offer a biweekly payment plan in which you pay in five installments over six to eight weeks, often with interest.
In 2026, interest-bearing installment loans accounted for over 37% of annual BNPL loan issuance, which is nearly double the share in 2021, according to a new report from Protect Borrowers. Late payment fees on some BNPL services can run $7 to $8 per payment, and interest plus financing fees can reach up to 36%, the report found.
“That can make a small loan turn into something that looks more like a payday loan,” said Protect Borrowers executive director Mike Pierce. “It’s the equivalent of an interest rate of 100% APR or more because you have these late fees that stack on top of each other.”
Industry groups say BNPL is helping consumers confront an affordability crisis and rising inflation.
“Consumers are increasingly choosing the flexibility that pay-over-time options with clear, transparent terms provide,” American Fintech Council CEO Phil Goldfeder wrote in a statement.
Miranda Margowsky, a spokesperson for the Financial Technology Association, wrote in an email that “splitting the cost of a purchase into four installments with zero to low interest is smart money management, not financial risk.”
Reed said she has not missed a BNPL payment because she knows the risks. But she still feels stuck.
“It’s almost like I’m in a never-ending cycle of doom,” she said. “I can’t get caught up, and then when I do pay it, something else comes up.”
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