16 million UK residents unaware of debt risk with BNPL

16 million UK residents unaware of debt risk with BNPL

Approximately 16 million UK residents remain oblivious to the financial risks associated with ‘Buy Now Pay Later’ (BNPL) services, says research from responsible lender, Creditspring.

The study reveals a severe misunderstanding of BNPL services, showing that 31% of UK adults don’t recognise that BNPL purchases could lead to debt. This unawareness rises to 51% for individuals aged 18-24, who are 29% more likely to use BNPL services compared to the UK average.

Interestingly, nearly 29% of UK citizens still do not realise that BNPL is a form of borrowing akin to credit cards. The number is considerably higher for the 18-24 age group, with 39% unaware of the associated risks. Only 23% of BNPL users feel completely in control of their spending when utilising these products.

The research further highlighted that 50% of young individuals are unaware that late or missed payments to BNPL providers can result in extra costs. A staggering 46% of respondents were oblivious to the fact that missed BNPL payments could lead to debt collection, and only 44% of BNPL users were able to repay loans without any complications, with 9% admitting it propelled them into debt.

Despite the lack of clarity regarding BNPL regulation from the FCA, Creditspring urges lenders to ensure borrower protection and responsible lending. The company warns of the potential risks vulnerable users face, who despite currently managing their BNPL payments, may struggle in the future due to unexpected financial changes, thus attracting late fees.

Creditspring CEO Neil Kadagathur said, “Despite increasing usage, there is still a severe misunderstanding of how BNPL works. After around a year of rising costs, household finances have been stretched to breaking points – many are using BNPL as a crutch until payday without being fully aware of the risks of doing so. The onus has to be on lenders to ensure that borrowers understand the risks and support them before they rack up huge debt piles.”

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